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Item 9A. Controls and Procedures

2024-04-09 compared with 2023-04-13 · 1081 added, 1245 removed, 1030 unchanged (69% of the section changed)

Controls and Procedures

Internal Control over Financial Reporting

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’).

Disclosure controls and procedures include, without limitation, controls and procedures

that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for the year ended December 31, 2023, in ensuring that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets

and expenditures are being made only in accordance with authorizations of our management and directors;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements

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In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework).

Based on this assessment, our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer), has concluded that, as of December 31, 2022, our internal controls over financial reporting were not effective based on those criteria.

Based on this assessment, our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer), has concluded that, as of December 31, 2023, our internal controls over financial reporting are not effective based on those criteria.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which are observed in many small companies with a small number of accounting and financial reporting staff:

• Insufficient segregation of duties on certain controls or processes;

• Limited resources to design and implement internal control procedures to support financial reporting objectives;

• The Company did not appropriately evaluate revenue recognition under ASC 606 for their AVOD/SVOD revenue streams for contracts with streaming platforms;

• Lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner;

• Insufficient procedures and documentation related to review type controls and information technology controls including complex transactions such as business combinations.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures include, without limitation, controls and procedures that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for the year ended December 31, 2022, in ensuring that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

The ineffectiveness of our internal control over financial reporting was due to the following which are observed in many small companies with a small number of accounting and financial reporting staff:

• Inadequate design of user access provisioning/deprovisioning controls and inadequate segregation of duties on certain controls or processes

• Lack of specialized experts related to income tax areas

• Inappropriate application of accounting standards related to warrant modifications

Management’s Plan to Remediate the Material Weaknesses

Management had been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively.

Such measures include the following:

• Continue to hire qualified accounting personnel to prepare and report financial information in accordance with GAAP;

• Continue to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures.

The Company continues to be committed to maintaining a strong internal control environment.

In response to the identified material weaknesses, management has taken comprehensive actions to strengthen its internal controls and has been and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated.

Our plans for remediation include, but are not limited to, the efforts summarized below, which have been or are in the process of being implemented:

• Enhanced procedures for formal documented review and approval of journal entries

• Reorganized the accounting team members to ensure proper segregation of duties

• Implemented core financial reporting and financial close software systems

• Performed risk assessment procedures and improved the documentation of internal processes and controls

• Improved documentation over complex financial transactions

• Implemented additional procedures over assessment of cybersecurity and information technology general controls.

• Increase the extent of oversight and verification checks included in operation of user access controls and processes

• Continue to enhance review over financial reporting, financial operations, internal controls including segregation of duties;

as well as improve tax analysis and fair value estimates

We will not be able to conclude whether these efforts will fully remediate the material weakness until the updated process has operated for a sufficient period of time and management has concluded, through testing, that such controls are operating effectively.

Changes in Internal Control over Financial Reporting

During the year ended December 31, 2022, we continued to execute upon our planned remediation actions which are all intended to strengthen our overall control environment.

This included hiring additional accounting personnel during the year at our corporate headquarters and other locations.

We are committed to maintaining a strong internal control environment and believe that these remediation efforts will represent significant improvements in our control environment.

Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Other than the remediation efforts described above, there was no change in our internal controls over financial reporting that occurred during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations over Internal Controls

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Other Information

During the quarter ended December 31, 2023, none of the Company’s directors or officers adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Board of Directors, Executive Officers, Promoters and Control Persons

The following table sets forth information about our directors and executive officers as of March 28, 2023:

The following table sets forth information about our directors and executive officers as of April 5, 2024:

Name Age Position

Andy Heyward 75 Chief Executive Officer and Chairman of the Board of Directors

Denton 63 Chief Financial Officer

Brian Parisi 54 Chief Financial Officer

Jaffa 58 Chief Operating Officer and Corporate Secretary

Michael Hirsh (1) 75 Director, Chief Executive Officer of Mainframe Studios

Joseph “Gray” Davis * 81 Director

Clark Hallren * 61 Director

Henry Sicignano III * 56 Director

Margaret Loesch * 77 Director

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_________________

* Denotes directors who are “independent” under applicable SEC and Nasdaq rules.

(1) Effective June 23, 2022, Michael Hirsh and Dr.

Stefan Piëch were elected as members of our Board of Directors

* Denotes directors who are “independent” under applicable SEC and NYSE rules.

Our directors hold office until the earlier of their death, resignation or removal or until their successors have been elected and qualified.

Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with the Company, either directly or indirectly.

Based upon this review, our Board of Directors has determined that the following members of the Board of Directors are “independent directors” as defined by the Nasdaq Marketplace Rules:

Joseph “Gray” Davis, P.

Clark Hallren, Lynne Segall, Margaret Loesch, Anthony Thomopoulos and Dr.

Based upon this review, our Board of Directors has determined that the following members of the Board of Directors are “independent directors” as defined by the NYSE standards:

Joseph “Gray” Davis, Henry Sicignano III, Lynne Segall, Margaret Loesch, Anthony Thomopoulos and Dr.

Cynthia Turner-Graham.

Andy Heyward, 75, has been the Company’s Chief Executive Officer since November 2013 and the Company’s Chairman of the Board since December 2013.

Heyward co-founded DIC Animation City in 1983 and served as its Chief Executive Officer until its sale in 1993 to Capital Cities/ ABC, Inc.

which was eventually bought by The Walt Disney Company in 1995.

Heyward co-founded DIC Animation City in 1983 and served as its Chief Executive Officer until its sale in 1993 to Capital Cities/ ABC, Inc., which was eventually bought by The Walt Disney Company in 1995.

Heyward ran the company while it was owned by The Walt Disney Company until 2000 when Mr.

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Heyward was chosen as a director because of his extensive experience in children’s entertainment and as co-founder of A Squared Entertainment.

Robert Denton, 63 , has been the Company’s Chief Financial Officer since March 2022 and previously served as the Company’s Executive Vice President of Finance and Accounting from December 14, 2021 through March 2022 and as Chief Financial Officer from April 2018 through December 13, 2021.

He served as the Chief Financial Officer of Atlys, Inc.

a next-gen media technology company from 2011 to 2018.

He has over 30 years of experience as a financial executive, specifically in the entertainment industry.

He began his career in 1982 with Ernst & Young handling filings with the SEC, including initial public offerings.

He left Ernst & Young in 1990 to work as Vice President and Chief Accounting Officer for LIVE Entertainment, Inc.

In 1996, LIVE was acquired by Artisan Entertainment, Inc., and, in December 2000, Mr.

Denton was promoted to Executive Vice President of Finance and CAO.

Denton also served as the COO of Artisan Home Entertainment, where he directed all financial reporting, budgeting and forecasting, manufacturing and distribution of the Home Entertainment Division.

Denton left Artisan at the end of 2003 and joined DIC Entertainment Corporation to serve as their Chief Financial Officer.

At DIC, he directed the three-year financial audit, due diligence and preparation of the company’s Admission Documents, and he was responsible for all monthly financial reporting to the Board of Directors as well as the semi-annual reporting to the AIM Exchange of the London Stock Exchange.

Denton left DIC in February 2009 after completing the acquisition and transition of DIC to the Cookie Jar Company.

Denton served as the Chief Financial Officer of Gold Circle Films from 2009 to 2011.

From 2009 to 2014, Mr.

Denton also owned and operated three Assisted Living Facilities for the Elderly, to help better care for his mother.

Denton is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants.

Brian Parisi, 54 , started with the Company as Chief Financial Officer during September 2023.

Parisi brings 30 years of experience across the entertainment, media, and high-tech industries, specializing in finance, accounting, M&A, corporate strategy, and business development.

Before joining Kartoon Studios, he was the Chief Financial Officer at Break the Floor Productions in Hollywood, California, an entertainment production company.

In this role, he notably prepared the company for sale, successfully completing two separate transactions with PE firms.

He managed all finance and accounting functions and effectively reduced the company's overall risk exposure.

Previously, Mr.

Parisi served as the Chief Financial Officer at the NFL Hall of Fame Village (HOFV), where he oversaw a wide range of financial activities including managing construction budgets, assist the company with its IPO, financial reporting, and cash management for the nearly $1 billion investment in a newly designed entertainment complex in Canton, Ohio.

In addition, he served as the Head of Finance for the Festivals Division at Live Nation Entertainment (LYV) where he was responsible for developing strategic plans for Electronic Dance Music festivals in multiple countries with more than 1.3 million fans annually.

Parisi has also held leadership positions at Warner Bros.

Entertainment (WBD) and NBC Universal (CMCSA).

Parisi is a CPA and holds a B.S.

in Accounting from Purdue University, Daniel School of Business, and an M.B.A.

in Strategic Management from the University of Southern California, Marshall School of Business.

Michael Jaffa , 58 , was promoted to Chief Operating Officer and General Counsel on December 7, 2020.

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Jaffa has over 20 years of experience handling licensing, production, merchandising, complex international transactions and employment issues for large and small entertainment companies and technology startups.

Michael Hirsh, 75 , has been a Director of the Company since 2022 and has served as Chief Executive Officer of Mainframe Studios, a Canadian-related entity of the Company since April 2022.

Hirsh served as Chief Executive Officer from December 2016 until April 2022, when the Company acquired Wow.

Prior to Wow, Mr.

Hirsh founded and was CEO of Cookie Jar which he merged with DHX Media (now Wild Brain) where he served as Executive Chairman from 2012 to 2015.

Hirsh was also a co-founder and CEO of Nelvana from 1971 to 2002 where he developed and

produced numerous award-winning productions including, The Magic School Bus, Care Bears, Babar, Rupert, Beetlejuice, The Adventures of Tintin and created the first Star Wars animated series with George Lucas.

Hirsh has won Daytime Emmy Awards, Gemini Awards, the Joe Shuster Award and a Golden Reel Award.

Hirsh was chosen as a director of the Company based on his experience launching hit productions including the first Star Wars animated programs, The Magic School Bus, Care Bears and Beetlejuice.

Joseph “Gray” Davis, 81, has been a Director of the Company since December 2013.

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Davis currently serves as “Of Counsel” in the Los Angeles, California office of Loeb & Loeb LLP.

Davis has served on the Board of Directors of DIC Entertainment and is a member of the bipartisan Think Long Committee, a Senior Fellow at the UCLA School of Public Affairs and Co-Chair of the Southern California Leadership Counsel.

Davis has served on the Board of Directors of DIC Entertainment and was a member of the bipartisan Think Long Committee, a Senior Fellow at the UCLA School of Public Affairs and is Co-Chair of the Southern California Leadership Counsel.

Davis received his undergraduate degree from Stanford University and received his Juris Doctorate from Columbia Law School.

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Davis was chosen as a director of the Company based on his knowledge of corporate governance.

Clark Hallren, 61, has been a Director of the Company since May 2014.

Since August 2013, Mr.

Hallren has been a realtor with HK Lane/Christie’s International Real Estate and since August 2012, Mr.

Hallren has served as an outside consultant to individuals and entities investing or operating in the entertainment industry.

From August 2012 to August 2014, Mr.

Hallren was a realtor with Keller Williams Realty and from August 2009 to August 2012, Mr.

Hallren founded and served as managing partner of Clear Scope Partners, an entertainment advisory company.

From 1986 to August 2009, Mr.

Hallren was employed by JP Morgan Securities Inc.

in various capacities, including as Managing Director of the Entertainment Industries Group.

In his roles with JP Morgan Securities, Mr.

Hallren was responsible for marketing certain products to his clients, including but not limited to, syndicated senior debt, public and private subordinated debt, public and private equity, securitized and credit enhanced debt, interest rate derivatives, foreign currency and treasury products.

Hallren holds Finance, Accounting and Economics degrees from Oklahoma State University.

He also currently holds Series 7, 24 and 63 securities licenses.

Hallren was chosen as a director of the Company based on his knowledge and experience in the entertainment industry as well as in banking and finance.

On September 27, 2023, in recognition of his commitment to education and innovation, Mr.

Davis received the UC President’s Medal – the University of California’s highest honor, from the UC President Michael V.

Henry Sicignano III, 56, was appointed to the Board and as Audit Committee Chairman effective May 22, 2023.

Sicignano is currently the President of Charlie’s Holdings, Inc., a consumer products company with a mission of creating better alternatives to combustible cigarettes, a role which he has held since April 2021.

Since July 12, 2023, he has also served as a Board Member and Audit Committee Chairman of Greenwave Technology Solutions, Inc., a leading operator of metal recycling facilities in Virginia, North Carolina and Cleveland, OH.

Previously, Mr.

Sicignano served as Chief Executive Officer of 22nd Century Group, Inc., a plant-based biotechnology company, from March 3, 2015 through July 26, 2019;

as President from January 25, 2011 through July 26, 2019;

and as a Director from January 25, 2011 through July 26, 2019.

Sicignano previously served on the Board of Directors of Anandia Laboratories, Inc.

and from August 2005 to April 2009, Mr.

Sicignano served as a General Manager and as the Director of Corporate Marketing for NOCO Energy Corp., a petroleum products company.

In addition, from March 2003 to July 2005, Mr.

Sicignano served as Vice President of Kittinger Furniture Company, a fine furniture manufacturer.

Sicignano holds a B.A.

Degree in Government from Harvard College and an M.B.A.

Degree from Harvard University.

Sicignano was chosen to be a director based on his expertise in competitive strategy, his extensive contacts within the investment community and his financial expertise.

Margaret Loesch, 77, has been the Executive Chairman of the Kartoon Channel!

since June 2020, a Director of the Company since March 2015 and the Executive Chairman of the Genius Brands Network since December 2016.

since June 2020 and a Director of the Company since March 2015.

Beginning in 2009 through 2014, Ms.

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Thomopoulos has operated Thomopoulos Productions and has served as a consultant to BKSems, USA, a digital signage company.

Thomopoulos is an advisor and a member of the National Hellenic Society and holds

a degree in Foreign Service from Georgetown University and sat on its Board of Directors from 1978 to 1988.

Thomopoulos is an advisor and a member of the National Hellenic Society and holds a degree in Foreign Service from Georgetown University and sat on its Board of Directors from 1978 to 1988.

Thomopoulos was chosen as a director of the Company based on his entertainment industry experience.

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Since October 2006, Dr.

Stefan Piëch has served as Chief Executive Officer of Your Family Entertainment AG (“YFE”) and Managing Partner of F&M Film und Medien Beteiligungs GmbH (“F&M”) since 2005.

Stefan Piëch has served as Chief Executive Officer of Your Family Entertainment AG (“YFE”) and Managing Partner of the Austrian company F&M Film und Medien Beteiligungs GmbH (“F&M”) since 2005.

Piëch was a founding member and the CEO of Openpictures AG from 2000 to 2005.

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The Board of Directors has responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations.

The primary responsibility of our Board of Directors is to oversee the management of our company and, in doing so, serve the best interests of the company and our stockholders.

The primary responsibility of our Board of Directors is to oversee the management of our company and, in doing so, serve the best interests of the company and our shareholders.

The Board of Directors selects, evaluates and provides for the succession of executive officers and, subject to stockholder election, directors.

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Management keeps the directors informed of company activity through regular communication, including written reports and presentations at Board of Directors and committee meetings.

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interest of the Company and its shareholders to partially combine these roles.

Due to the small size of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officers positions combined.

The Company currently has nine directors, including Mr.

The Company currently has eight directors, including Mr.

Heyward, its Chairman, who also serves as the Company’s Chief Executive Officer.

The Chairman and the Board are actively involved in the oversight of the Company’s day to day activities.

Cybersecurity Governance

Oversight responsibility for information security matters is shared by the Board, Chief Financial Officer (“CFO”), VP of Internal Audit and our internal information technology (“IT”) resources.

Our CFO and VP of Internal Audit oversee our cybersecurity risk management, including appropriate risk mitigation strategies, systems, processes, and controls, and receives quarterly updates from IT and the third-party IT service provider on cybersecurity and information security matters.

The CFO communicates quarterly with the Board on the state of our cybersecurity risk management, current and evolving threats, and recommendations for changes.

We have also implemented a cyber incident response plan that provides a protocol to report certain incidents to the CFO with the goal of timely assessment of such incidents, determining applicable disclosure requirements and communicating with the Board for timely and accurate reporting of any material cybersecurity incident.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our officers, directors and any persons who own more than 10% of common stock, to file reports of ownership of, and transactions in, our common stock with the SEC and furnish copies of such reports to us.

Based solely on our reviews of the copies of such forms and amendments thereto furnished to us and on

written representations from officers, directors, and any other person whom we understand owns more than 10% or our common stock, we found that during 2022, all Section 16(a) filings were made with the SEC on a timely basis except that one Form 3 was filed late by Dr.

Stefan Piëch, one Form 3 was filed late by Michael Hirsh, one Form 4 covering two transactions was filed late by Michael Hirsh and one Form 4 covering two transactions was filed late by Michael Hirsh.

Based solely on our reviews of the copies of such forms and amendments thereto furnished to us and on written representations from officers, directors, and any other person whom we understand owns more than 10% of our common stock, we found that during 2023, all Section 16(a) filings were made with the SEC on a timely basis, except that one Form 3 was filed late by Mr.

Sicignano and one Form 4 covering three transactions was filed late for each of Mr.

Sicignano III, Mr.

Thomopoulos and Dr.

Turner-Graham.

Code of Conduct and Ethics

We have adopted a Corporate Code of Conduct and Ethics and Whistleblower Policy that applies to all of our officers, directors and employees.

A copy of the Code of Conduct and Ethics and Whistleblower Policy can be obtained, free of charge by submitting a written request to the Company or on our website at www.gnusbrands.com.

Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be posted on the “Investor Relations-Corporate Governance” section of our website at www.gnusbrands.com or included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.

A copy of the Code of Conduct and Ethics and Whistleblower Policy can be obtained, free of charge by submitting a written request to the Company or on our website at www.kartoonstudios.com.

Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be posted on the “Investor Relations-Corporate Governance” section of our website at www.kartoonstudios.com or included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.

Board Committees

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Joseph “Gray” Davis X X X X

Clark Hallren X Chair X X

Margaret Loesch X

Lynne Segall (2) X X Chair

Anthony Thomopoulos (3) Vice Chair Chair

Henry Sicignano III (2) X Chair X

Margaret Loesch X X

Lynne Segall (3) X X Chair Chair

Anthony Thomopoulos (3) Vice Chair

Cynthia Turner-Graham X

Michael Hirsh (1) X

Stefan Piëch (1)

Meetings in 2023:

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(1) Effective June 23, 2022, Michael Hirsh and Dr.

Stefan Piëch were elected as members of our Board of Directors

(2) Effective July 18, 2022, Lynne Segall replaced Michael Klein on the Audit Committee.

(3) Effective September 1, 2022, Joseph "Gray" Davis replaced Anthony Thomopoulos on the Audit Committee.

The Board of Directors has adopted a policy under which each member of the Board of Directors makes every effort, but is not required, to attend each annual meeting of our stockholders.

To assist it in carrying out its duties, the Board of Directors has delegated certain authority to an Audit Committee, a Compensation Committee, a Nominating Committee and an Investment Committee as the functions of each are described below.

(1) Effective December 14, 2023, Michael Hirsh resigned from the Board of Directors.

(2) Effective May 22, 2023, Henry Sicignano III was elected as a member of our Board of Directors, replacing Clark Hallren.

(3) Effective July 11, 2023, Lynne Segall replaced Anthony Thomopoulos as Chair of the Compensation Committee.

The Board of Directors has adopted a policy under which each member of the Board of Directors makes every effort, but is not required, to attend each annual meeting of our shareholders.

To assist in carrying out its duties, the Board of Directors has delegated certain authority to an Audit Committee, a Compensation Committee, a Nominating Committee and an Investment Committee as the functions of each are described below.

Audit Committee

Davis and Hallren and Ms.

Davis and Sicignano III and Ms.

Segall serve on our Audit Committee.

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The Board of Directors has adopted an Audit Committee Charter and the Audit Committee reviews and reassesses the adequacy of the Charter on an annual basis.

The Audit Committee members meet Nasdaq’s financial literacy requirements and are independent under applicable SEC and Nasdaq rules, and the board has further determined that Mr.

Hallren (i) is an “audit committee financial expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC and (ii) also meets Nasdaq’s financial sophistication requirements.

A copy of the Audit Committee’s written charter is publicly available on our website at www.gnusbrands.com .

The Audit Committee members meet NYSE’s financial literacy requirements and are independent under applicable SEC and NYSE rules, and the board has further determined that Mr.

Sicignano is an “audit committee financial expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC.

A copy of the Audit Committee’s written charter is publicly available on our website at www.kartoonstudios.com .

Compensation Committee

Thomopoulos and Hallren serve on the Compensation Committee and are independent under the applicable SEC and Nasdaq rules.

Segall and Loesch serve on the Compensation Committee and are independent under the applicable SEC and NYSE rules.

Our Compensation Committee’s main functions are assisting our Board of Directors in discharging its responsibilities relating to the compensation of outside directors, the Chief Executive Officer and other executive officers, as well as administering any stock incentive plans, we may adopt.

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The Board of Directors has adopted a Compensation Committee Charter and the Compensation Committee reviews and reassesses the adequacy of the Charter on an annual basis.

The Compensation Committee’s policy is to offer our executive officers competitive compensation packages that will permit us to attract and retain highly qualified individuals and to motivate and reward these individuals in an appropriate fashion aligned with the long-term interests of our Company and our stockholders.

Compensation Committee Risk Assessment

We have assessed our compensation programs and concluded that our compensation practices do not create risks that are reasonably likely to have a material adverse effect on us.

A copy of the Compensation Committee’s written charter is publicly available on our website at www.gnusbrands.com .

A copy of the Compensation Committee’s written charter is publicly available on our website at www.kartoonstudios.com .

Nominating Committee

Segall and Mr.

Davis serve on our Nominating Committee.

Davis and Ms.

Segall serve on our Nominating Committee.

The Nominating Committee’s responsibilities include:

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The Board of Directors has adopted a Nominating Committee charter and the Nominating Committee reviews and reassesses the adequacy of the Charter on an annual basis.

For all potential candidates, the Nominating Committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the Board of Directors, and concern for the long-term interests of our stockholders.

The Nominating Committee considers issues of diversity among its members in identifying and considering nominees for director, and strives, where appropriate, to achieve a diverse balance of backgrounds, perspectives and experience on the board and its committees.

A copy of the Nominating Committee’s written charter is publicly available on our website at www.gnusbrands.com .

A copy of the Nominating Committee’s written charter is publicly available on our website at www.kartoonstudios.com .

Investment Committee

Davis and Hallren serve on our Investment Committee.

Davis and Sicignano III serve on our Investment Committee.

The primary purpose of the Investment Committee is to assist the Board in reviewing our Investment Policy and strategies and in overseeing our capital and financial resources.

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Stockholder Communications to the Board

Generally, stockholders who have questions or concerns should contact our Investor Relations department at 212-564-4700.

However, any stockholders who wish to address questions regarding our business directly with the Board of Directors, or any individual director, should direct his or her questions in writing to Genius Brands International, Inc., at 190 N.

Generally, shareholders who have questions or concerns should contact our Investor Relations department at 844-589-8760.

Canon Drive, 4th Floor, Beverly Hills, California 90210, Attn:

Corporate Secretary or by using the “Contact” page of our website www.gnusbrands.com/contact-us.

Communications will be distributed to the Board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications.

Items that are unrelated to the duties and responsibilities of the Board may be excluded, such as:

Corporate Secretary or by using the “Contact” page of our website www.kartoonstudios.com/contacts .

Communications will be distributed to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications.

Items that are unrelated to the duties and responsibilities of the Board of Directors may be excluded, such as:

• Junk mail and mass mailings

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EXECUTIVE OFFICER AND DIRECTOR COMPENSATION

This section describes the material elements of compensation awarded to, earned by or paid to each of our named executive officers.

Our compensation committee will review and approve the compensation of our executive officers and oversee our executive compensation programs and initiatives.

Summary Compensation Table

The following table provides information regarding the total compensation for services rendered in all capacities that was earned during the fiscal year indicated by our named officers for fiscal year 2022 and 2021.

Name and Principal Position Year Salary ($) Bonus ($) Stock

($) (1) Option

($) (1) All Other

($) Total ($)

Andy Heyward (2) 2022 440,000 220,000 – – 775,000 1,435,000

Chief Executive Officer 2021 440,000 212,987 – – 543,750 1,196,737

Jaffa (3) 2022 374,871 150,000 – – – 524,871

Chief Operating Officer, General Counsel and Corporate Secretary 2021 326,326 25,000 – – – 351,326

Michael Hirsh (4) 2022 323,512 – 390,000 316,481 * – 1,029,993

Chief Executive Officer of Mainframe Studios.

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* Excluded from the Option Awards granted to Mr.

Hirsh is the fair value of the replacement options granted upon the acquisition of Wow that were previously earned and vested prior to the acquisition of $341,152.

(1) The aggregate fair value of the stock awards and stock option awards on the date of grant was computed in accordance with FASB ASC Topic 718.

Heyward entered into a five-year employment agreement on December 7, 2020, pursuant to which is entitled to an annual salary of $440,000.

During 2022, Mr.

Heyward was paid $775,000 in producer fees and earned $220,000 in discretionary bonuses.

Jaffa entered into a three-year employment agreement on December 7, 2020.

Under his employment agreement, Mr.

Jaffa is entitled to an annual salary of $325,000 the first year, $350,000 the second year and $375,000 the third year and an annual signing bonus of $50,000 each year.

On December 7, 2020, the Company granted 100,000 stock options to Mr.

Jaffa with a strike price of $13.90 and a term of 10 years.

40,000 of the options vested on the grant date with the remaining options vesting 20,000 each of the next three years.

On December 7, 2020, the Company also granted 50,000 RSUs to Mr.

The RSUs vest 16,667 on the first anniversary, 16,667 on the second anniversary and 16,667 on the third anniversary.

(4) Effective April 7, 2022, the Company entered into an employment agreement with Mr.

Hirsh, whereby Mr.

Hirsh agreed to serve as the Chief Executive Officer of the Company's wholly owned subsidiaries WOW Unlimited Inc.

and its subsidiaries Mainframe Studios and Frederator for a period of three years in consideration for an annual salary of $440,000.

Hirsh is also entitled to earn $12,400 as an executive producer fee per 30 minute broadcast episode.

In addition, on June 23, 2022, Mr.

Hirsh was granted 50,000 RSUs with a fair value of $390,000 that vest evenly on each six month anniversary of the grant date and 50,000 options with an exercise price of $7.80 per share, with a fair value of $316,481 on the grant date, that vest 16,666 on the first anniversary, 16,666 on the second anniversary and 16,667 on the third anniversary.

Narrative Disclosure to Summary Compensation

In 2022, the Company paid $440,000 to Andy Heyward, $374,871 to Michael A.

Jaffa and $323,512 to Michael Hirsh.

In 2021, the Company paid $440,000 to Mr.

Heyward and $326,326 to Mr.

Base salaries are used to recognize experience, skills, knowledge and responsibilities required of all of our employees, including our executive officers.

All Other Compensation.

Pursuant to his employment agreement dated December 7, 2020, Mr.

Heyward is entitled to an Executive Producer fee of $12,500 per one-half hour episode for each episode for which he provides services as an executive producer.

During 2022, Mr.

Heyward was paid $775,000 in producer fees.

Bonus Compensation.

Our named executive officers are expected to be eligible to receive an annual bonus award in accordance with their employment agreements and/or management incentive program then in effect with respect to such executive officer and based on an annualized target of base salary, as specified in their respective employment agreements, if applicable.

In fiscal 2022, Mr.

Heyward was paid bonuses of $220,000 and Mr.

Jaffa was paid a bonus of $150,000.

In fiscal 2021, Mr.

Heyward was paid bonuses of $212,987 and Mr.

Jaffa was paid a bonus of $25,000.

Equity Based Incentive Awards .

We believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders.

In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentivizes our named executive officers to remain in our employment during the vesting period.

Accordingly, our compensation committee and Board periodically review the equity incentive compensation of our named executive officers and from time to time may grant additional equity incentive awards to them in the form of stock options or other awards.

During the year ended, December 31, 2022, no awards granted to our named executive officers have been modified or repriced.

See Outstanding Equity Awards at Fiscal Year-End below for details.

Employment Agreements

CEO Employment Agreement

On November 16, 2020, the Company entered into an amended and restated employment agreement, as further amended on each of February 22, 2021, June 23, 2021, November 22, 2021, August 25, 2022 and February 27, 2023 (the “CEO Employment Agreement”) with Andy Heyward, whereby Mr.

Heyward agreed to serve as the Company’s Chief Executive Officer for a period of five years, subject to renewal, in consideration for an annual salary of $440,000, and an award of 500,000 stock options and 1,500,000 RSUs.

Heyward is also eligible to be paid a producing fee equal to $12,500 per one-half hour episode for each series produced, controlled and distributed by the Company, and for which he provides material production services provided as the executive producer for up to 52 one-half hour episodes.

Additionally, under the terms of the CEO Employment Agreement, Mr.

Heyward shall be eligible for a quarterly discretionary bonus of $55,000 per fiscal quarter if the Company meets certain criteria, as established by the Board of Directors.

Heyward shall be entitled to reimbursement of reasonable expenses incurred in connection with his employment and the Company may take out and maintain during the term of his tenure a life insurance policy in the amount of $1,000,000.

During the term of his employment and under the terms of the CEO Employment Agreement, Mr.

Heyward shall be entitled to be designated as composer on all music contained in the programming produced by the Company and to receive composer’s royalties from applicable performing rights societies.

The CEO Employment Agreement provides for the assignment of music royalties to Mr.

Heyward for all musical compositions in which he provides services as a composer for or on behalf of the Company, in the event that the Company acquires up to 50% of the writer's share of the royalties for that musical composition.

If the Company acquires more than 50% of the writer's share of the royalties on musical compositions Mr.

Heyward provided services for, he has the option to purchase the additional royalties from the Company at the price the Company paid to acquire the additional royalties.

The CEO Employment Agreement also makes Mr.

Heyward eligible to receive Executive Producer Fees for up to 52 half-hour episodes per year and provides that Mr.

Heyward shall receive a bonus of $100,000 per quarter for services rendered to the Company’s subsidiary Wow Unlimited Media.

The options granted to Mr.

Heyward were fully vested on the date of grant.

One-half of the RSUs granted to Mr.

Heyward vest over time subject to Mr.

Heyward’s continued employment, and one-half vest in equal installments on the first, second, third and fourth anniversaries of the date of grant, subject to the achievement of certain performance criteria, to be determined by the Compensation Committee, and subject to Mr.

Heyward’s continued employment.

In the event of Mr.

Heyward’s death or resignation, all compensation then currently due would be payable to his estate.

The CEO Employment Agreement also entitles Mr.

Heyward to separation payments in certain circumstances.

In the event Mr.

Heyward’s employment terminates due to his death or retirement after the age of 65, in addition to accrued base salary and vacation and expense reimbursement, he is entitled to receive (i) any unpaid quarterly bonus for the fiscal quarter preceding the fiscal quarter in which such termination occurs and (ii) if earned, a pro-rated quarterly bonus for the fiscal quarter in which such termination occurs.

In the event Mr.

Heyward’s employment terminates due to his permanent disability, in addition to accrued base salary and expense reimbursement, he is entitled to receive (i) any unpaid quarterly

bonus for the fiscal quarter preceding the fiscal quarter in which such termination occurs, (ii) if earned, a pro-rated quarterly bonus for the fiscal quarter in which such termination occurs and (iii) for a period of six months (or for the remaining months of the term of his employment, if less than six months), monthly payments equal to the amount, if any, of his monthly base salary in excess of any disability benefits being received by Mr.

Heyward, provided that he will not be entitled to any compensation under (i), (ii) or (iii) unless he signs a release of claims against the Company.

On June 23, 2021, the Compensation Committee amended 375,000 unvested service-based awards and 750,000 unvested performance-based awards previously issued to Mr.

Heyward, such that the RSUs shall vest based on performance or market conditions.

The total unvested RSUs of 1,125,000 were modified to vest as follows:

(i) 375,000 RSUs vest when the closing sale price of the common stock equals or exceeds $30.00 per share or the Company’s market capitalization equals or exceeds $903,000,000 for 20 consecutive trading days;

(ii) 375,000 RSUs vest when the closing sale price of the common stock equals or exceeds $35.00 per share or the Company’s market capitalization equals or exceeds $1,053,500,000 for 20 consecutive trading days, and (iii) 375,000 RSUs vest when the closing sale price of the common stock equals or exceeds $37.50 per share or the Company’s market capitalization equals or exceeds $1,128,750,000 for 20 consecutive trading days (the “market conditions”).

In the event the stock price and market capitalization vesting conditions set forth above are not achieved, such 1,125,000 RSUs may vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, based on achievement of certain other operating performance-based vesting conditions established by the Compensation Committee on June 23, 2021 and subject to his continued employment, adjusted pro-ratably for vesting pursuant to the market conditions above.

In the event of a Change in Control, the Committee will determine the extent to which the Common Stock Price Hurdles and/or the Market Capitalization Hurdles are achieved based on the value of the consideration per share paid to the Company's stockholders in the Change in Control transaction.

COO and General Counsel Employment Agreement

On November 7, 2020, the Company entered into an amended and restated agreement, as further amended on each of December 16, 2021 and January 8, 2023 (the “COO and General Counsel Employment Agreement”) with Michael A.

Jaffa, pursuant to which Mr.

Jaffa would assume the role of Chief Operating Officer ("COO") and General Counsel commencing on December 7, 2020.

The term of the agreement is three years.

In addition, Mr.

Jaffa will be entitled to an annual discretionary bonus based on his performance.

In the event of Mr.

Jaffa’s death or resignation, all compensation then currently due would be payable to his estate.

The COO and General Counsel Employment Agreement provides Mr.

Jaffa with, during the three year term of the General Counsel Employment Agreement (i) an annualized base salary of $325,000 for the first year of the term, $375,000 for the second year of the term and $450,000 for the third year of the term, (ii) discretionary annual bonuses determined in the sole discretion of the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”), and (iii) eligibility to receive renewal bonuses of $50,000 beginning within 60 days following the effective date of the COO and General Counsel Employment Agreement and each anniversary thereafter during the term, subject to Mr.

Jaffa’s continued employment.

The agreement granted Mr.

Jaffa 100,000 stock option and 50,000 RSUs.

The Options granted to Mr.

Jaffa were partially vested on the date of grant, and vest with respect to the unvested amounts in substantially equal installments on the first three anniversaries of the grant date, subject to continued employment.

The RSUs granted to Mr.

Jaffa vest in three equal installments on the first three anniversaries of the date of grant, subject to continued employment.

Any unvested Options or RSUs held by Mr.

Jaffa will vest upon his termination of employment without Cause or resignation for Good Reason, each as defined in the Option Grant and RSU Grant agreement.

The COO and General Counsel Employment Agreement also entitles Mr.

Jaffa to separation payments in certain circumstances.

In the event Mr.

Jaffa’s employment terminates due to his death or retirement after the age of 65, in addition to accrued base salary and vacation and expense reimbursement, he is entitled to receive any unpaid annual bonus for the fiscal year preceding the fiscal year in which such termination occurs.

In the event Mr.

Jaffa’s employment terminates due to his permanent disability, in addition to accrued base salary and expense reimbursement, he is entitled to receive (i) any unpaid annual bonus for the fiscal year preceding the fiscal year in which such termination occurs, and (ii) for a period of two months (or for the remaining months of the term of his employment, if less than six months), monthly payments equal to the amount, if any, of his monthly base salary in excess of any disability benefits being received by Mr.

Jaffa, provided that he will not be entitled to any compensation under (i) or (ii) unless he signs a release of claims against the Company.

Additionally, the COO and General Counsel Employment Agreement contains certain restrictive covenants regarding confidential information, intellectual property, non-competition and non-solicitation.

Wow CEO Employment Agreement

Effective April 7, 2022, the Company entered into an employment agreement with Michael Hirsh (the "Hirsh Agreement"), whereby Mr.

Hirsh agreed to serve as the Chief Executive Officer of the Company's wholly owned subsidiaries WOW Unlimited Inc.

and its subsidiaries Mainframe Studios and Frederator for a period of three years in consideration for an annual salary of $440,000.

Hirsh is also eligible for an annual performance bonus of up to 100% of his base salary rate, in the discretion of our board of directors.

Hirsh is also entitled to earn $12,400 as an executive producer fee per 30-minute broadcast episode.

In addition, on June 23, 2022, Mr.

Hirsh was granted 50,000 RSUs with a fair value of $390,000 that vest evenly on each six month anniversary of the grant date and 50,000 options with an exercise price of $7.80 per share and a fair value of $316,481 on the grant date, that vest 16,666 on the first anniversary, 16,667 on the second anniversary and 16,667 on the third anniversary.

Hirsh may at any time terminate his employment upon providing three months' prior written notice to the Company.

Hirsh provides written notice of termination, the Company may at its sole discretion terminate his employment upon providing a pro rata share of his base salary in lieu of notice for the remaining time in the three-month notice period and the payment of any amounts required under applicable employment standards legislation.

The Company may at any time terminate this agreement without cause by providing Mr.

Hirsh written notice during a 24-month notice period.

At the Company's sole discretion, the Company may provide payment in lieu of notice for all or any part of the notice period, by continuing to pay the annual salary on a monthly basis for 12 months and paying a lump sum equal to the annual salary thereafter (the “Termination Payment”).

Hirsh may resign for Good Reason (as defined below) by providing 30 days’ notice after the occurrence of the event constituting Good Reason and providing the Company with 30 days to remedy such event.

If the Company fails to remedy the event within 30 days of notice, then the Company must pay Mr.

Hirsh the Termination Payment.

Hirsh is terminated by the Company without just cause or resigns for Good Reason and has been employed for a full fiscal year prior to such termination, he shall be eligible to receive his standard bonus for such fiscal year.

Further, if Mr.

Hirsh is terminated by the Company without just cause or resigns for Good Reason, any unvested options or RSUs held by him shall automatically vest.

Hirsh is terminated for any reason, the Company will pay Mr.

Hirsh any earned but unpaid salary and expense reimbursement.

By accepting any of the foregoing potential payments due to Mr.

Hirsh upon his termination, Mr.

Hirsh will be deemed to have released any claims, rights or entitlements he may have against the Company.

“Good Reason” is defined in the Hirsh Agreement as one or more of the following events occurring without Mr.

Hirsh’s written consent:

(i) a reduction in his base salary, (ii) a material diminution of Mr.

Hirsh’s authority, duties or responsibilities, (iii) relocation of Mr.

Hirsh’s principal place of employment from a place over 50 kilometers from the Company’s current Toronto office, or (iv) material breach of the Hirsh Agreement by the Company.

Retirement Benefits

As of December 31, 2022, the Company did not provide any retirement plans to its executive officers or employees.

Potential Payments upon Termination or Change-in-Control

Payments upon Termination

Our employment agreements with our named executive officers provide incremental compensation in the event of termination, as described above under Employment Agreements .

Further, our equity incentive plans have provisions for payments to our named executive officers if they are terminated as a result of death or disability.

Under our 2015 Incentive Plan, if a grantee is terminated due to death or disability, the following adjustments shall be made to such grantee’s awards (unless any particular award agreement provides otherwise):

(i) any outstanding options and stock appreciation rights shall become immediately exercisable in full, (ii) any restricted stock shall become immediately vested in full, (iii) any restricted stock units and any unpaid dividend equivalents shall become immediately vested in full, and (iv) any cash awards or other stock-based awards shall become immediately vested in full.

Under our 2020 Incentive Plan, if a grantee is terminated due to death or disability, the Compensation Committee may, in its sole discretion, make the following adjustments to such grantee’s awards:

(i) termination of restrictions in any award agreements (ii) acceleration of any or all installments and rights, and/or (iii)

payment of the grantee’s aggregated accelerated payments in a lump sum to the grantee (or the grantee’s estate, beneficiaries or representative, as applicable).

Payments upon Change in Control

Under our 2015 Incentive Plan, upon a Change in Control, the Compensation Committee may, but is not required to, provide for one or more of the following:

(i) acceleration, vesting or lapsing of awards, (ii) cancellation of awards for fair value (as determined in the sole discretion of the Compensation Committee), (iii) issuance of substitute awards that substantially preserve the terms of the original awards, (iv) provision that options and rights shall be exercisable prior to such Change in Control and then be terminated following the Change in Control, or (v) any other action with respect to the awards as the Compensation Committee determines to be appropriate in its discretion.

Under our 2020 Incentive Plan, upon a Change in Control, the Compensation Committee may, but is not required to, provide for one or more of the following:

(i) assumption of the 2020 Incentive Plan and outstanding awards by the surviving entity or its parent, (ii) issuance of substitute awards that substantially preserve the terms of the original awards, (iii) notice to holders of vested options and rights that such options and rights shall be exercisable prior to such Change in Control and then be terminated following the Change in Control, (iv) settlement of the intrinsic value of outstanding vested options and rights in cash, cash equivalence or equity (regardless of vesting status), (v) cancellation of all unvested or unexercisable awards, or (vi) any other action with respect to the awards as the Compensation Committee determines to be appropriate in its discretion;

provided that in connection with an assumption or substitution awards under (i) or (ii), the awards so assumed or substituted shall continue to vest or become exercisable pursuant to the terms of the original award, except to the extent such terms are otherwise rendered inoperative.

Under our 2015 Incentive Plan and our 2020 Incentive Plan, “Change in Control” is defined to mean any of the following events:

(a) any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (other than the Company or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the “beneficial owner” within the meaning of Rule 13d 3 promulgated under the Act of 30% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors;

excluding, however, any circumstance in which such beneficial ownership resulted from any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or by any corporation controlling, controlled by, or under common control with, the Company;

(b) a change in the composition of the board of directors since the date of shareholder approval, such that the individuals who, as of such date, constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such board;

provided that any individual who becomes a director of the Company subsequent to date of shareholder approval whose election, or nomination for election by the Company’s stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board;

and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person or entity other than the Board shall not be deemed a member of the Incumbent Board;

(c) a reorganization, recapitalization, merger, consolidation or similar form of corporate transaction, or the sale, transfer, or other disposition of all or substantially all of the assets of the Company to an entity that is not an Affiliate (each of the foregoing events, a “Corporate Transaction”) involving the Company, unless securities representing 60% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction, including a corporation that, as a result of such transaction owns all or substantially all of the Company’s assets (or the direct or indirect parent of such corporation), are held immediately subsequent to such transaction by the person or persons who were the beneficial holders of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction;

or (d) the liquidation or dissolution of the Company (or under the 2020 Incentive Plan, stockholder approval of such liquidation or dissolution), unless such liquidation or dissolution is part of a transaction or series of transactions described in clause (c) above that does not otherwise constitute a Change in Control.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth outstanding equity awards as of December 31, 2022 to each of the named executive officers.

Option Awards Stock Units Awards

Name Number of securities underlying

unexercised options (#) exercisable Number of securities underlying

unexercised options (#) unexercisable Option exercise price ($) Option expiration date Equity incentive plan awards:

securities underlying unearned Restricted

Stock Units (#) Market Value

of Shares ($)

Andy Heyward 500,000 (1) – 13.90 12/07/30 1,031,250 (2) 14,343,525

Jaffa 8,509 (3) – 20.90 04/16/23 – –

1,500 (3) – 19.90 03/07/24 – –

80,000 (4) 20,000 (4) 13.90 12/07/30 16,667 (5) 231,669

Michael Hirsh 58,270 (6) – 14.90-16.60 04/05/25 – –

– 9,699 (6) 5.10 02/10/26 – –

– 50,000 (7) 7.80 06/23/32 50,000 (7) 390,000

______________________

Heyward’s options vested upon the grant date.

(2) Of the 375,000 time-based RSUs previously issued to Mr.

Heyward, 93,750 vested on the first anniversary date of December 20, 2021 and 93,750 vested on the second anniversary date of December 31, 2022.

On June 23, 2021, the Compensation Committee amended 375,000 unvested service-based awards and 750,000 unvested performance-based awards previously issued to Mr.

Heyward, such that the RSUs shall vest based on performance or market conditions.

The total unvested RSUs of 1,125,000 were modified to vest as follows:

On April 7, 2022, 281,250 of the 1,125.000 modified RSUs vested upon the achievement of completing the Wow and Ameba acquisitions.

Jaffa’s options vested as of December 31, 2021.

(4) 40,000 of Mr.

Jaffa’s options vested upon grant and 20,000 vested on the first anniversary date of December 7, 2021 and 20,000 vested on the second anniversary of December 7, 2022.

The remaining 20,000 options will vest on December 31, 2023.

(5) 16,666 of Mr.

Jaffa’s RSUs vested on the first anniversary date of December 7, 2021 and 16,666 vested on the second anniversary of December 7, 2022.

The remaining 16,668 RSUs will vest on December 7, 2023.

(6) On April 7, 2022, Mr.

Hirsh was granted 67,969 of replacement option awards to purchase the Company's common stock subject to providing continued service to the Company after acquisition of Wow.

The number of shares granted and the exercise prices were based on an exchange ratio upon the acquisition date and the vesting terms remained the same as the original awards previously granted by Wow.

The options expire within 3 years from the replacement option grant date or the original Wow option, whichever is greater.

Of the replacement options granted to Mr.

Hirsh, 58,270 were vested previous to the acquisition date and will expire on April 5, 2025 and 9,699 will vest on February 10, 2024 and expire on February 10, 2026.

(7) On June 23, 2022, Mr.

Hirsh was granted 50,000 RSUs with a fair value of $390,000 that vest evenly on each six month anniversary of the grant date and 50,000 options with an exercise price of $7.80 per share and a fair value of $316,481 on the grant date, that vest 16,666 on the first anniversary, 16,667 on the second anniversary and 16,667 on the third anniversary.

Director Compensation

The following table sets forth with respect to each of our non-employee directors, compensation information inclusive of equity awards and payments earned for the year ended December 31, 2022.

Name Year Fees

Earned or Paid in Cash

($) (2) All Other

Joseph “Gray” Davis (3) 2022 51,250 – – 51,250

Clark Hallren (4) 2022 60,000 – – 60,000

Margaret Loesch (5) 2022 40,000 – 90,000 130,000

Lynne Segall (6) 2022 52,500 – – 52,500

Anthony Thomopoulos (7) 2022 53,750 – 37,500 91,250

Cynthia Turner-Graham (8) 2022 40,000 – – 40,000

Michael Hirsh (9) 2022 – 706,481 – 706,481

Stefan Piëch (10)

______________________

(1) Directors, other than Mr.

Heyward and Mr.

Hirsh, earn $10,000 for each quarterly meeting attended.

Directors, other than Mr.

Hirsh and Mr.

Piëch, also earn $10,000 as appointed Chairmen and $5,000 as members of the Company’s Compensation, Audit, Investment and Nominating Committees.

(2) Represents the grant date fair value in accordance with FASB ASC Topic 718.

The assumptions applied in determining the fair value of the awards are discussed in the Notes to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

Davis was paid $40,000 for services on the Board, $1,250 as a member of the Company's Audit Committee, $5,000 as a member of the Company’s Nominating Committee and $5,000 as a member of the Company’s Investment Committee.

Hallren was paid $40,000 for services on the Board, $10,000 as Chair of the Company’s Audit Committee, $5,000 as a member of the Company’s Compensation Committee and $5,000 as a member of the Company’s Investment Committee.

Loesch was paid $40,000 for services on the Board for 2022 and $90,000 for services as Executive Chairperson of the Kartoon Channel!

Segall was paid $40,000 for services on the Board and $10,000 as the Chair of the Company’s Nominating Committee.

Thomopoulos was paid $40,000 for services on the Board, $3,750 as a member of the Company's Audit Committee, $10,000 as Chair of the Company’s Compensation Committee and $37,500 for other consulting services.

Cynthia Turner-Graham was paid $40,000 for services on the Board.

(9) Effective June 23, 2022, Mr.

Hirsh was elected as a member of our Board of Directors and was granted 50,000 RSUs with a value of $390,000 that vest evenly on each six month anniversary of the grant date and 50,000 options with an exercise price of $7.80 per share and a fair value of $316,481 on the grant date, that vest 16,666 on the first anniversary, 16,667 on the second anniversary and 16,667 on the third anniversary.

(10) Effective June 23, 2022, Dr.

Stefan Piëch was elected as a member of our Board of Directors.

Information required by this item is incorporated by reference from information contained under the section “Executive Officer and Director Compensation” in our Proxy Statement for the Annual Meeting of Stockholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

7 unchanged sentences

Percentage ownership is based on 35,367,653 shares of common stock outstanding as of April 5, 2024.

Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is c/o 190 N.

Unless otherwise indicated in

the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is c/o 190 N.

Canon Drive, Floor 4, Beverly Hills, CA 90210.

4 unchanged sentences

Michael Jaffa 150,000 (3) *

Denton 117,309 (4) *

Michael Hirsh 81,507 (4) *

Anthony Thomopoulos 20,908 (5) *

Henry Sicignano 16,891 (7) *

Joseph (Gray) Davis 22,812 (5) *

Clark Hallren 3,845 (7) *

Margaret Loesch 19,215 (5) *

18 unchanged sentences

Jaffa, that will become exercisable within 60 days of April 5, 2024.

(4) Consists of 31,300 shares of common stock held by Mr.

Denton or issuable upon vested RSUs and 86,009 shares of common stock issuable upon exercise of stock options granted to Mr.

Denton, that will become exercisable within 60 days of April 12, 2023.

(5) Consists of 26,168 shares of common stock, 58,270 shares of Exchangeable shares, exchangeable into shares of common stock and 58,270 shares issuable upon exercise of stock options granted to Mr.

Hirsh that will become exercisable within 60 days of April 12, 2023.

(6) Consists of 1,857 shares of common stock held and 2,000 shares of common stock issuable upon exercise of stock options granted to Mr.

Thomopoulos that will become exercisable within 60 days of April 12, 2023.

(7) Consists of 1,845 shares of common stock held and 2,000 shares of common stock issuable upon exercise of stock options granted to each Board Member that will become exercisable within 60 days of April 12, 2023.

(4) Consists of 23,237 shares of common stock and 58,270 shares of Exchangeable shares, exchangeable into shares of common stock granted to Mr.

Hirsh that are exercisable within 60 days of April 5, 2024.

(5) Consists of 15,416 shares of common stock held and 2,000 shares of common stock issuable upon exercise of stock options granted to each that are exercisable within 60 days of April 5, 2024.

In addition, Mr.

Davis held 5,396 shares of common stock, Ms.

Loesch held 1,799 shares of common stock, Ms.

Segall held 8,993 shares of common stock and Mr.

Thomopoulos held 3,480 shares of common stock.

(6) Consists of 8,527 shares of common stock held and 2,000 shares of common stock issuable upon exercise of stock options granted to Dr.

1 unchanged sentence

(7) Consists of 16,891 shares of common stock held by Mr.

(8) Consists of 348,127 shares of common stock held by Mr.

Equity Compensation Plan Information

On September 18, 2015, the Company adopted the Genius Brands International, Inc.

2015 Incentive Plan (the “2015 Plan”).

The 2015 Plan was approved by our stockholders in September 2015.

The 2015 Plan as approved by the stockholders authorized the issuance of up to an aggregate of 15,000 shares of common stock.

On December 14, 2015, the Board of Directors voted to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 129,333 from 15,000 shares to 144,333 shares.

The increase in shares available for issuance under the 2015 Plan was approved by stockholders on February 3, 2016.

On May 18, 2017, the Board of Directors voted to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 223,333 shares from 144,333 shares to an aggregate of 166,767 shares.

The increase in shares available for issuance under the 2015 Plan was approved by the stockholders on July 25, 2017.

On September 6, 2018, the Board of Directors voted to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 50,000 shares from 166,767 shares to an aggregate of 216,767 shares.

The increase in shares available for issuance under the 2015 Plan was approved by the Company’s stockholders on October 2, 2018.

On August 4, 2020, the Board of Directors voted to adopt the Genius Brands International, Inc 2020 Incentive Plan (the “2020 Plan”).

The shares available for issuance under the 2020 Plan were approved by stockholders on August 27, 2020.

The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate of 3,216,767 shares of common stock, which does not include shares that the Company may issue related to acquisitions.

The following table reflects, as of December 31, 2022, compensation plans pursuant to which we are authorized to issue options, restricted stock units, common stock or other rights to purchase shares of its common stock, including the

number of shares issuable under outstanding options and rights issued under the plans and the number of shares remaining available for issuance under the plans.

The Company adopted the 2020 Incentive Plan (the "2020 Plan") on September 1, 2020, following the approval of the Board of Directors.

The Board of Directors authorized up to an aggregate of 3,000,000 shares of common stock as the maximum number of shares available for issuance, which does not include shares related to acquisitions.

The 2020 Plan replaced the previously adopted 2015 Incentive Plan (the “2015 Plan”) which had a total number of authorized shares of 216,767.

However, the remaining shares outstanding under the 2015 Plan are still to be governed by that plan.

As of December 31, 2023, 57,800 stock options granted under the 2015 Plan remain outstanding.

Any expired or terminated shares from the 2015 Plan that have not been vested or exercised become available for issuance under the 2020 Plan, resulting in total authorized shares of 3,216,767.

As of December 31, 2023, 3,071,922 are outstanding under the 2020 Plan, which excludes remaining shares outstanding granted as replacement options as part of the Wow acquisition.

The following table reflects compensation plans pursuant to which we are authorized to issue options and restricted stock units, including the number of shares issuable under outstanding options and rights issued under the plans and the number of shares remaining available for issuance under the plans as of December 31, 2023.

Plan category Number of securities to be issued

upon exercise of outstanding options, vesting of restricted stock units and other rights Weighted-average exercise price of

outstanding options, restricted stock units and other rights Number of securities remaining available

outstanding options (1) Number of securities remaining available

for future issuance under equity

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Equity compensation plans not approved by shareholders – – –

Equity compensation plans approved by shareholders 2,146,175 $ 13.04 87,045

Equity compensation plans not approved by shareholders – – –

Total 2,203,975 $ 14.07 87,045

(1) The weighted average exercise price calculation does not take into account any restricted stock units or performance shares.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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A related person is:

(i) an executive officer, director or director nominee of the Company, (ii) a beneficial owner of more than 5% of our common stock, (iii) an immediate family member of an executive officer, director or director nominee or beneficial owner of more than 5% of our common stock, or (iv) any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.

(i) an executive officer, director or director

nominee of the Company, (ii) a beneficial owner of more than 5% of our common stock, (iii) an immediate family member of an executive officer, director or director nominee or beneficial owner of more than 5% of our common stock, or (iv) any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.

Described below are certain transactions or relationships between us and certain related persons.

Pursuant to his employment agreements dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of $12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the year ended December 31, 2022 and December 31, 2021, Mr.

Pursuant to his employment agreement dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of $12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the years ended December 31, 2023 and December 31, 2022, Mr.

Heyward earned $343,750 and $775,000 in producer fees, respectively, and earned $220,000 in quarterly bonuses in each year ended.

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Heyward earned $0 in royalties from musical compositions.

Pursuant to his employment agreement dated April 7, 2022, Michael Hirsh, CEO of Wow and its Frederator and Mainframe Studio subsidiaries is entitled to an Executive Producer fee of $12,400 per one-half hour for each episode of any audio-visual production produced by Wow and any of its subsidiaries during the term of his employment, up to 52 episodes per year .

On February 27, 2023, Mr.

Heyward’s employment agreement was further amended to provide him a creative producer fee of $100,000 per quarter for services rendered to Wow, prorated for the first quarter.

During the year ended December 31, 2023, Mr.

Hirsh earned $– in producer fees under the employment agreement.

Heyward earned $325,556 in creative development fees.

On July 21, 2020, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward.

The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain products to be sold by AHAA.

The terms and conditions of such license are customary within the industry, and the Company earns an arm-length industry standard royalty on all sales made by AHAA

utilizing the licensed content.

The terms and conditions of such license are customary within the industry, and the Company earns an arm-length industry standard royalty on all sales made by AHAA utilizing the licensed content.

During the year ended December 31, 2023, Mr.

Heyward earned $0 in royalties from this agreement.

On December 1, 2021, the Company entered into an Independent Contractor Agreement for two years with F&M Film and Medien Beteiligungs GmbH ("F&M"), a company controlled by Dr.

On December 1, 2021, the Company entered into an Independent Contractor Agreement for two years with F&M Film und Medien Beteiligungs GmbH (“F&M”), an Austrian company controlled by Dr.

Stefan Piëch.

Pursuant to the agreement, F&M will receive $150,000 annually, paid on a semi-monthly basis.

Pursuant to the agreement, F&M received $150,000 annually, paid on a semi-monthly basis.

In addition, Dr.

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Independence of the Board of Directors

Our determination of the independence of our directors is made using the definition of “independent” contained in the listing standards of the Nasdaq Capital Market.

Our determination of the independence of our directors is made using the definition of “independent” contained in the listing standards of the NYSE American Capital Market.

On the basis of information solicited from each director, the board has determined that each of Messrs.

Davis, Hallren and Thomopoulos as well as each of Mses.

Segall and Turner-Graham are independent directors within the meaning of such rules.

Davis, Thomopoulous and Sicignano and Mses.

Loesch, Segall and Turner-Graham are independent directors within the meaning of such rules.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

The following table sets forth fees billed to us by our independent registered public accounting firm for the years ended December 31, 2022 and 2021 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.

Current Principal Accountant Fees and Services

WithumSmith+Brown, PC (“Withum”) served as our independent registered public accounting firm for the fiscal year ended December 31, 2023 and has served as our independent registered public accounting firm since January 29, 2024.

There were no fees paid by us to Withum in 2022 or 2023 for audit and other services rendered.

Former Principal Accountants Fees and Services

On October 23, 2023 the Audit Committee of the Board of Directors dismissed Baker Tilly US, LLP (“Baker Tilly”) as our independent registered public accounting firm and approved replacing them with Mazars USA LLP (“Mazars”) on October 23, 2023.

The following table sets forth fees billed to us by our independent registered public accounting firm Baker Tilly for the years ended December 31, 2023 and 2022 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.

Audit Fees $ 581,839 $ 510,019

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Total Fees $ 862,408 $ 563,355

Our policy is to pre-approve all audit and permissible non-audit services performed by the independent registered public accounting firm.

On January 24, 2024, our Audit Committee of the Board of Directors dismissed Mazars as our independent registered public accounting firm and approved replacing them with Withum on January 29, 2024.

There were no fees paid by us to Withum in 2023 for audit and other services rendered.

The following table sets forth fees billed to us by our independent registered public accounting firm Mazars for the years ended December 31, 2023 and 2022 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.

Audit Fees $ 70,720 $ –

Audit-Related Fees – –

Other Fees – –

Total Fees $ 70,720 $ –

We obtain an engagement letter for all audit and tax services.

The Board pre-approves the services performed by the independent registered public accounting firm.

These services may include audit services, audit-related services, tax services and other services, as follows:

• Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

• Audit services include professional services rendered by the principal accountant for the audit of the annual and review of the quarterly financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

• Audit-Related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

• Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

• Other Fees are those associated with services not captured in the other categories.

The Company generally does not request such services from the independent auditor.

Under our policy, pre-approval is generally provided for particular services or categories of services, including planned services, project-based services and routine consultations.

In addition, the Board of Directors may also pre-approve particular services on a case-by-case basis.

Our Board of Directors approved all services that our independent registered public accounting firm provided to us in the past three fiscal years.

• Other Fees are those associated with services provided by the principal accountant not captured in the other categories.

Exhibits, Financial Statement Schedules

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(Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2021)

3.1 Articles of Incorporation of Genius Brands International Inc., as amended

3.2 Certificate of Change to the Articles of Incorporation of Genius Brands International, Inc., filed with the Secretary of State of the State of Nevada on February 9, 2023 (Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 10, 2023)

3.3 Bylaws of Genius Brands International, Inc., as amended (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 19, 2019)

2.2 Agreement and Plan of Merger dated June 21, 2023 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 27, 2023)

3.1 Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K, filed with the SEC on March 31, 2021)

3.2 Certificate of Change to the Articles of Incorporation of the Company , filed with the Secretary of State of the State of Nevada on February 9, 2023 (Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 10, 2023)

3.3 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.6 to the Company’s Form S-3, filed with the SEC on July 26, 2023)

3.4 Amended and Restated Certificate of Designations, Preferences and Rights of the 0% Series A Convertible Preferred Stock, filed with the Secretary of State of Nevada on November 21, 2019 (Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 21, 2019)

3.5 Certificate of Designation of Series B Preferred Stock (Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 12, 2022)

4.1 Form of Investor Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 3, 2017)

4.2 Form of Investor Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 8, 2018)

3.6 Articles of Merger of Kartoon Studios, Inc.

into the Company (incorporated by reference to Exhibit 3.1 to the Compa ny ’s Current Report on Form 8-K filed on June 27, 2023).

3.7 Certificate of Designation of Series C Preferred Stock of the Company , dated September 25, 2023 (incorporated by reference to Exhibit 3.1 to the Company ’ s Registration Statement on Form 8-A, filed on September 25, 2023 )

3.8 First Amendment to the Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company ’ s Current Report on Form 8-K, filed on September 25, 2023 )

3.9 Certificate of Change to the Articles of Incorporation of the Company, filed with the Secretary of State of the State of Nevada on November 9, 2023 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2023)

4.1 Form of Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2018)

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4.3 Description of Capital Stock (Incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2020)

4.6 Form of Waiver Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2019)

4.4 Form of Investor Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 28, 2019)

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4.6 Form of New Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 28, 2021)

10.1† 2008 Stock Option Plan (Incorporated by reference from Registration Statement on Form 10 filed with the SEC on May 4, 2011)

10.2† First Amendment to 2008 Stock Option Plan (Incorporated by reference from Registration Statement on Form 10 filed with the SEC on May 4, 2011)

10.3† Second Amendment to 2008 Stock Option Plan (Incorporated by reference from Registration Statement on Form 10 filed with the SEC on May 4, 2011)

10.4† Form of Stock Option Grant Notice (Incorporated by reference from Registration Statement on Form 10 filed with the SEC on May 4, 2011)

10.6† Employment Agreement dated November 15, 2013 between Genius Brands International, Inc.

and Andrew Heyward (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 20, 2013)

10.10† Genius Brands International, Inc.

2015 Incentive Plan, as amended (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2017)

10.13 Loan and Security Agreement dated August 5, 2016 between Genius Brands International, Inc.

and Llama Productions LLC (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2016)

10.14 Subscription Agreement dated January 17, 2017 between Genius Brands International, Inc.

and Sony DADC USA, Inc.

4.7 Form of New Warrant (incorporated by reference to Exhibit 4.1 to the Company ’s Current Report on Form 8-K filed on June 27, 2023)

4.8 Form of Indenture for Senior Debt Securities (incorporated by reference to Exhibit 4.4 to the Company’s Form S-3, filed with the SEC on December 22, 2023)

4.9 Form of Indenture for Subordinated Debt Securities (incorporated by reference to Exhibit 4.5 to the Company’s Form S-3, filed with the SEC on December 22, 2023)

10.1† Form of Stock Option Grant Notice Pursuant to the Company's 2020 Incentive Plan (Incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on December 11, 2020)

10.2† Form of Restricted Stock Unit Agreement Pursuant to the Company's 2020 Incentive Plan (Incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on December 11, 2020)

10.3† 2 015 Incentive Plan of the Company , as amended (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2017)

10.4 Subscription Agreement dated January 17, 2017 between the Company and Sony DADC USA, Inc.

(Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 17, 2017)

10.17 Securities Purchase Agreement dated January 8, 2018(Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 8, 2018)

10.19 Securities Purchase Agreement dated August 17, 2018 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2018)

10.5 Registration Rights Agreement dated August 17, 2018 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2018)

10.21 Loan and Security Agreement dated September 28, 2018, by and between Llama Productions LLC and Bank Leumi USA (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 4, 2018)

10.22 Amendment No.

2 to Loan and Security Agreement, effective as of August 27, 2018, by and between Llama Productions LLC and Bank Leumi USA (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 4, 2018)

10.23† Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Michael Jaffa, dated November 7, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 11, 2020)

10.24† Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Andrew Heyward, dated December 7, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 11, 2020)

10.25 Form of Letter Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 28, 2021)

10.26 Purchase and Sale Agreement, dated February 1, 2021, by and among Genius Brands International, Inc., GBI Acquisition LLC, 2811210 Ontario Inc.

and Harold Aaron Chizick, Jennifer Mara Chizick, Wishing Thumbelina Inc., and Harold Aaron Chizick and Jennifer Mara Chizick, trustees of The Chizick (2019) Family Trust for and on behalf of Harold Aaron Chizick, Jennifer Mara Chizick and Jay Mark Sonshine, the trustees of The Chizick (2019) Family Trust (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on February 2, 2021)

10.6† 2020 Incentive Plan of the Company (Incorporated by reference to the Company’s Form S-8 filed with the SEC on November 16, 2020)

10.7† Amended and Restated Employment Agreement between the Company and Michael Jaffa, dated November 7, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 11, 2020)

10.8† Amended and Restated Employment Agreement between the Company and Andrew Heyward, dated December 7, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 11, 2020)

10.9†* Amendment No.

1 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Andrew Heyward dated February 22, 2021

1 to the Amended and Restated Employment Agreement between the Company and Andrew Heyward dated February 22, 2021 (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.10†* Amendment No.

2 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Andrew Heyward dated June 23, 2021

2 to the Amended and Restated Employment Agreement between the Co mpany and Andrew Heyward dated June 23, 2021 (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.11†* Amendment No.

3 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Andrew Heyward dated November 22, 2021

10.30 Share Purchase Agreement, dated of December 1, 2021, by and among Genius Brands International, Inc.

and F&M Film-und Medien Beteiligungs GmbH (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2021)

10.31 Shareholder Agreement, dated as of December 1, 2021 among Genius Brands International, Inc.

and F&M Film-und Medien Beteiligungs GmbH (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2021)

10.32† Stock Option Grant Notice and Stock Option Grant Agreement between Genius Brands International, Inc.

and Zrinka Dekic dated December 9, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 14, 2021)

3 to the Amended and Restated Employment Agreement between the Company and Andrew Heyward dated November 22, 2021 (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.12 Share Purchase Agreement, dated of December 1, 2021, by and the Co m pany and F&M Film-und Medien Beteiligungs GmbH (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2021)

10.13 Shareholder Agreement, dated as of December 1, 2021 among the Company and F&M Film-und Medien Beteiligungs GmbH (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2021)

10.14† Amendment No.

1 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Michael Jaffa dated December 16, 2021

1 to the Amended and Restated Employment Agreement between the Company and Michael Jaffa dated December 16, 2021 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.15† Employment Agreement between Wow Unlimited Media Inc.

and Michael Hirsh dated April 7, 2022

and Michael Hirsh dated April 7, 2022 (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.16† Amendment No.

4 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Andrew Heyward dated August 25, 2022

4 to the Amended and Restated Employment Agreement between the Company and Andrew Heyward dated August 25, 2022 (incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.17† Amendment No.

2 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Michael Jaffa dated January 8, 2023

2 to the Amended and Restated Employment Agreement between the Company and Michael Jaffa dated January 8, 2023 (incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.18† Amendment No.

5 to the Amended and Restated Employment Agreement between Genius Brands International, Inc.

and Andrew Heyward dated February 27, 2023

10.38† Genius Brands International, Inc.

2020 Incentive Plan (Incorporated by reference to the Company’s Form S-8 filed with the SEC on November 16, 2020)

21.1* List of Subsidiaries

5 to the Amended and Restated Employment Agreement between the Company and Andrew Heyward dated February 27, 2023 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K, filed with the SEC on April 13, 2023)

10.19 Form of Letter Agreement (incorporated by reference to Exhibit 10.1 to the Company ’s Current Report on Form 8-K filed on June 27, 2023).

10.20 Termination of Lease Agreement, dated July 26, 2023 by and between Lyndhurst Investments, LLC.

and Beacon Media Group (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed with the SEC on August 14, 2023)

10.21† Employment Agreement dated as of September 15, 2023, by and between the Company and Brian Parisi, effective as of September 27, 2023 (incorporated by reference to Exhibit 10.1 to the Company ’ s Current Report on Form 8-K filed on October 3, 202 3 )

10.22†* Amendment No.

3 to the Amended and Restated Employment Agreement between the Company and Michael Jaffa dated November 13, 2023

16.1 Letter from Baker Tilly US, LLP, dated October 27, 2023 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on October 27, 2023)

16.2 Letter from Mazars USA LLP, dated January 30, 2024 (incorporated by reference to Exhibit 16.

1 to the Company’s Current Report on Form 8-K filed on January 30, 2024)

21.1* List of Subsidiaries of the Company

23.1* Consent of WithumSmith+Brown, PC

23.2* Consent of Baker Tilly US LLP

31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32.1* Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2* Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

31.1* Section 302 Certification of Chief Executive Officer

31.2* Section 302 Certification of Chief Financial Officer

32.1** Section 906 Certification of Chief Executive Officer

32.2** Section 906 Certification of Chief Financial Officer

97.1* Kartoon Studios, Inc.

Clawback Policy, effective December 1, 2023

101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

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* Filed herewith.

** Furnished herewith.

† Management contract or compensatory plan or arrangement.

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Genius Brands International, Inc.

Kartoon Studios, Inc.

April 5, 2024 By:

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Chief Executive Officer (Principal Executive Officer)

April 13, 2023 /s/ Robert L.

April 5, 2024 /s/ Brian Parisi

Chief Financial Officer (Principal Financial and Accounting Officer)

3 unchanged sentences

Chief Executive Officer (Principal Executive Officer)

/s/ Robert L.

Denton April 13, 2023

/s/ Brian Parisi April 5, 2024

Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ Michael Klein April 13, 2023

Michael Klein

/s/ Henry Sicignano III April 5, 2024

Henry Sicignano III

/s/ Joseph “Gray” Davis April 5, 2024

Joseph “Gray” Davis

Clark Hallren April 13, 2023

Clark Hallren

/s/ Lynne Segall April 5, 2024

4 unchanged sentences

Cynthia Turner-Graham April 5, 2024

/s/ Michael Hirsh April 13, 2023

Cynthia Turner-Graham

/s/ Stefan Piëch April 5, 2024

GENIUS BRANDS INTERNATIONAL, INC.

KARTOON STUDIOS, INC.

INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:

CONSOLIDATED FINANCIAL STATEMENTS

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Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of Genius Brands International, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Genius Brands International, Inc.

and its subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows, for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

To the Board of Directors and Stockholders of Kartoon Studios, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Kartoon Studios, Inc.

and Subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the December 31, 2022 consolidated balance sheet has been restated to correct a misstatement related to the recording of a deferred tax liability within purchase accounting.

We also have audited the adjustments described in Note 2 that were applied to restate the December 31, 2022 consolidated balance sheet to correct the error.

In our opinion, such adjustment is appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the 2022 consolidated financial statements of the Company, other than with respect to the adjustment and, accordingly, we do not express an opinion or any other form of assurance on the 2022 consolidated financial statements taken as a whole.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

The Company is not required to have, nor were we engaged to perform, audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Emphasis of the Matter – Restatement of Unaudited Interim Financial Statements

As discussed in Note 2 to the consolidated financial statements, the unaudited condensed consolidated balance sheets as of June 30, 2022 and September 30, 2022 and the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2023, as of and for the three and six months ended June 30, 2023 and as of and for the nine months ended September 30, 2023 has been restated to correct misstatements related to deferred tax liabilities and a warrant modification.

Critical Audit Matters

1 unchanged sentence

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Film and Television Costs, net

Critical Audit Matter Description

As disclosed in Note 2 to the consolidated financial statements, the Company capitalizes production costs for episodic series produced in accordance with Financial Accounting Standards Board Accounting Standards Codification 926-20, Entertainment-Films-Other Assets-Film Costs.

Accordingly, production costs are capitalized and amortized based on the attributable revenue for each contract to the estimated total remaining attributable revenue for each contract.

The Company expenses the capitalized costs that exceed the estimated attributable revenue in the period of delivery of the episodes.

The Company evaluates its capitalized production costs annually.

Auditing the amortization of the Company's film production costs is complex and subjective due to the judgmental nature of amortization, including estimates of future attributable revenues based on historical experience and signed commitments.

If actual revenue differs from these estimates, the pattern and/or period of amortization would be changed and could materially affect the timing and the amount of production costs amortization recognized.

How We Addressed the Matter in Our Audit:

The primary procedures we performed to address this critical audit matter included:

• Obtained an understanding and evaluated the design and implementation of the Company's controls over its estimation process of revenues attributable to each contract.

• Evaluating the significant assumptions used by the Company to develop the estimated attributable revenues for each contract including management’s forecasts of estimated future revenues and future commitments.

• Performing a look-back analysis of management’s historical estimates compared to actual results.

• Testing the completeness and accuracy of the underlying data used in the analysis.

• Obtaining a memorandum from management understanding the nature and timing of accelerated amortization compared to prior periods.

• Performing a sensitivity analysis of the estimate future revenues to evaluate the change in amortization of the Company’s costs related from changes in the assumption.

• Recalculating the amortization expense and performed analytical procedures.

Valuation of Intangible Assets for the Wow and Ameba Acquisitions

Critical Audit Matter Description

As disclosed in Note 3, the Company completed two business combinations during 2022.

The Company measured the assets acquired and liabilities assumed at fair value, which resulted in the recognition of intangible assets consisting of tradenames, customer relationships, networks and platforms, technology, and goodwill.

Auditing the valuation of intangible assets involved complex and subjective judgments and estimation due to the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires significant estimation such as expectations of future revenue, expenses, capital expenditures and other costs as well as the discount rate.

How We Addressed the Matter in Our Audit:

The primary procedures we performed to address this critical audit matter included:

• Obtained an understanding and evaluated the design and implementation of the Company's controls over its estimation process supporting the recognition and measurement of the customer relationships intangible assets and trade name intangible assets, including controls over management’s evaluation of the methodology and underlying assumptions used in determining the fair value.

• Involved auditor-engaged valuation specialist to assist with our evaluation of the methodologies used by the Company and significant assumptions included in the fair value estimates.

• Performed analyses to evaluate the sensitivity of changes in significant assumptions to the fair value of the intangible assets and compared the significant assumptions to current industry and market and economic trends.

• Evaluated the Company's selection of the valuation methodology and significant assumptions used by the Company in the valuation of the intangible assets, and the reasonableness of significant assumptions and estimates.

• Tested the completeness and accuracy of the inputs and data used within the significant assumptions.

• Tested the clerical accuracy of the models.

/s/ Baker Tilly US, LLP

The communication of critical audit matters does not alter in any way our

opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Complex Equity Transactions

As discussed in Note 16, on June 26, 2023, the Company entered into warrant exercise inducement offer letters (the “Letter Agreements”) with certain holders of the warrants issued by the Company in January 2021 that had an exercise price of $23.70 per share and were exercisable for an aggregate of 2,311,550 shares of the Company’s common stock (the “2021 Warrants”).

Pursuant to the Letter Agreements, the exercising holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the holders would exercise all of their 2021 Warrants for shares of the Company’s common stock at a reduced exercise price of $2.50 per share of common stock in exchange for the issuance of new unregistered warrants (the “Exchange Warrants”) to purchase up to an aggregate of 4,623,100 shares of common stock, equal to 200% of the number of common stock underlying the 2021 Warrants.

The Company calculated the fair value of the 2021 Warrants exercised immediately before the repricing and after the repricing using the Black Scholes option pricing model.

The resulting increase in fair value of $3.5 million, was considered a deemed dividend and reflected within Additional Paid-in Capital on the consolidated balance sheet as of December 31, 2023.

The accounting for the transactions required an assessment of the particular features of the warrants, and the impact of those features on the accounting and classifications of the warrants.

The complexities and significant estimates required a high degree of auditor judgement and an increased extent of audit effort, including the involvement of professionals in our firm with expertise in the accounting for financial instruments.

Our audit procedures related to management’s judgements of the accounting treatment for the warrants and classification, as well as the determination of fair value of the transactions.

Our audit procedures included, among others, inspecting the agreements and evaluating the terms and conditions of the agreements and assessing the reasonableness of management’s interpretation and application of the appropriate accounting authoritative guidance.

Our audit procedures also included utilizing personnel with specialized skill and knowledge to assist in assessing the appropriateness of conclusions reached by management by evaluating the underlying terms of the agreements and assessing the appropriateness of management’s application of the authoritative accounting guidance.

In addition, we evaluated the methodologies and assumptions used to estimate the fair value of the warrants.

We recalculated the value of the warrants before and after the modification date and recalculated the amount of the deemed dividend.

Impairment of Goodwill and Intangible Assets

During the year ended December 31, 2023, the Company recorded an impairment charge of $4.4 million to Intangible Assets and an impairment charge of $33.5 million to Goodwill, resulting in a balance of Intangible assets, net of approximately $23 million and a balance of Goodwill of $0 as of December 31, 2023, respectively.

As discussed in Note 2 to the consolidated financial statements, the Company completes the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year.

To test for goodwill impairment, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit, of which the Company has two, is less than its carrying value.

If impairment is indicated in the qualitative assessment, or, if management elects to initially perform a quantitative assessment of goodwill, the impairment test uses a one-step approach.

The fair value of a reporting unit is compared with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired.

If the carrying amount of a reporting unit exceeds its fair value, an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Intangible assets have been acquired, either individually or with a group of other assets, and were initially recognized and measured based on fair value.

Subjective auditor judgment was required to evaluate certain key assumptions used to determine the fair value of the reporting units and the intangible assets.

For the reporting units, the key assumptions included the discount rates used in the present value calculations and forecasted revenue growth rates and operational cost trends.

For the intangible assets, the key assumptions included the discount rates used in the present value calculations and the forecasted revenue growth rate and operational cost trends.

Changes to these key assumptions could have had a substantial impact on the fair value of the reporting units and indefinite-lived intangible asset and the amount of the impairment charges.

Additionally, the audit effort associated with the estimates required specialized valuation skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the Company’s third-party specialist and their valuation report and checked it for mathematical accuracy.

We reviewed key valuation inputs and reviewed the comparable company guidelines for reasonableness.

We evaluated the forecasted revenue growth and operational costs for reasonableness by utilizing historical rates to benchmark and also used peer company data.

We evaluated the Company’s discount rates by comparing the assumptions and data used by management to develop the discount rates to publicly available market data and historical experience.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the appropriateness of the valuation method utilized.

/s/ WithumSmith+Brown, PC

We have served as the Company's auditor since 2024.

Whippany, New Jersey

April 5, 2024

PCAOB ID Number:

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Genius Brands International, Inc.

(n/k/a Kartoon Studios, Inc.):

Opinion on the Consolidated Financial Statements

We have audited, before the effects of the adjustments to restate the previously issued financial statements described in Note 2, the accompanying consolidated balance sheet of Genius Brands International, Inc.

and subsidiaries (n/k/a Kartoon Studios, Inc.) (the “Company”) as of December 31, 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively, referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements before the effects of the adjustments to restate the previously issued financial statements described in Note 2 present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments to restate the previously issued financial statements described in Note 2 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited by other auditors.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Baker Tilly US, LLP

We served as the Company's auditor from 2016 to 2023.

Los Angeles, California

April 12, 2023

Genius Brands International, Inc.

Kartoon Studios, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(in thousands, except share and par value data)

As of December 31,

ASSETS 2022 2021

Current Assets:

Cash and Cash Equivalents $ 7,432 $ 2,058

Restricted Cash – 8,002

Investments in Marketable Securities (amortized cost of $ 90,321 )

Cash $ 4,095 $ 7,432

Investments in Marketable Securities (amortized cost of $ 12,838 and $ 90,321 , respectively)

11,950 83,706

23 unchanged sentences

Margin Loan 782 60,810

Production Facilities, net 18,282 –

Production Facilities

15,336 18,282

Bank Indebtedness 2,905 1,741

Current Portion of Operating Lease Liability 802 664

Current Portion of Finance Lease Liability 1,623 –

Current Portion of Operating Lease Liabilities 908 802

Current Portion of Finance Lease Liabilities 1,120 1,623

Warrant Liability 63 548

4 unchanged sentences

Deferred Revenue 3,458 3,369

Operating Lease Liability, Net Current Portion 8,095 2,460

Finance Lease Liability, Net Current Portion 1,020 –

Deferred Tax Liability 705 –

Contingent Earn Out – 1,340

Operating Lease Liabilities, Net Current Portion 6,736 8,095

Finance Lease Liabilities, Net Current Portion 928 1,020

Deferred Tax Liability, net 1,399 2,372

Other Noncurrent Liabilities 14 952

2 unchanged sentences

Stockholders’ Equity:

Preferred Stock Series A, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

Preferred Stock Series B, $ 0.001 par value, 1 share authorized, 1 share issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

Common Stock, $ 0.001 par value, 40,000,000 shares authorized, 31,918,552 and 30,337,914 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

Preferred Stock, 9,943,999 and 9,993,999 shares authorized, 0 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

0 % Series A Convertible Preferred Stock, $ 0.001 par value, 6,000 shares authorized, 0 shares issued and outstanding as of December 31, 2023 and December 31, 2022

Series B Preferred Stock, $ 0.001 par value, 1 share authorized, 1 share issued and outstanding as of December 31, 2023 and December 31, 2022

Series C Preferred Stock, $ 0.001 par value, 50,000 shares authorized, 0 shares issued and outstanding as of December 31, 2023 and December 31, 2022

Common Stock, $ 0.001 par value, 190,000,000 and 40,000,000 shares authorized, 35,323,217 and 31,961,185 shares issued and 35,247,744 and 31,918,552 outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional Paid-in Capital 773,986 762,418

Treasury Stock at Cost, 75,473 and 42,633 shares of common stock as of December 31, 2023 and December 31, 2022, respectively

( 339 ) ( 290 )

Accumulated Deficit ( 718,546 ) ( 641,443 )

Accumulated Other Comprehensive Loss ( 3,883 ) ( 9,925 )

Total Genius Brands International, Inc.

Total Kartoon Studios, Inc.

Stockholders' Equity 51,570 111,079

3 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

Genius Brands International, Inc.

Kartoon Studios, Inc.

Consolidated Statements of Operations

10 unchanged sentences

General and Administrative 35,324 45,851

Impairment of Property and Equipment 134 –

Impairment of Intangible Assets 4,413 4,117

4 unchanged sentences

Other Income (Expense), net ( 2,679 ) 1,625

Loss Before Income Tax Expense ( 44,424 ) ( 126,367 )

Income Tax Expense ( 105 ) –

Loss Before Income Tax Benefit (Expense) ( 78,175 ) ( 44,424 )

Income Tax Benefit (Expense) 973 ( 105 )

Net Loss ( 77,202 ) ( 44,529 )

Net Loss (Income) Attributable to Non-Controlling Interests ( 1,066 ) 76

Net Loss Attributable to Genius Brands International, Inc.

Net (Income) Loss Attributable to Non-Controlling Interests 99 ( 1,066 )

Net Loss Attributable to Kartoon Studios, Inc.

$ ( 77,103 ) $ ( 45,595 )

4 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

Genius Brands International, Inc.

Kartoon Studios, Inc.

Consolidated Statements of Comprehensive Loss

3 unchanged sentences

Change in Accumulated Other Comprehensive Income (Loss):

Change in Unrealized Losses on Marketable Securities ( 5,774 ) ( 1,325 )

Change in Unrealized Gain/(Losses) on Marketable Securities 1,231 ( 5,774 )

Realized Losses on Marketable Securities Reclassified from AOCI into Earnings 4,496 413

Foreign Currency Translation Adjustments 315 ( 3,343 )

Total Change in Accumulated Other Comprehensive Loss ( 8,704 ) ( 1,216 )

Total Change in Accumulated Other Comprehensive Income (Loss) 6,042 ( 8,704 )

Total Comprehensive Net Loss $ ( 71,160 ) $ ( 53,233 )

Net Loss (Income) Attributable to Non-Controlling Interests ( 1,066 ) 76

Total Comprehensive Net Loss Attributable to Genius Brands International, Inc.

Net (Income) Loss Attributable to Non-Controlling Interests 99 ( 1,066 )

Total Comprehensive Net Loss Attributable to Kartoon Studios, Inc.

$ ( 71,061 ) $ ( 54,299 )

The accompanying notes are an integral part of these consolidated financial statements.

Genius Brands International, Inc.

Kartoon Studios, Inc.

Consolidated Statements of Stockholders' Equity

3 unchanged sentences

Balance, December 31, 2021 30,337,914 $ 303 — $ – $ 739,495 — $ — $ ( 595,848 ) $ ( 1,221 ) $ 1,924 $ 144,653

Shares Issued for ChizComm Acquisition 198,067 2 – – 3,525 – – – – – 3,527

Shares Issued for YFE Acquisition 228,127 2 – – 3,406 – – – – – 3,408

Proceeds From Warrant Exchange, net 3,974,050 40 – – 57,225 – – – – – 57,265

Issuance of Common Stock for Services 80,777 1 – – 1,248 – – – – – 1,249

Warrant Inducement – – – – 69,139 – – – – – 69,139

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 13,042 – – – – – – – – – –

Share Based Compensation – – – – 16,451 – – – – – 16,451

Other Comprehensive Loss Total – – – – – – – – ( 1,216 ) – ( 1,216 )

Contributions from Non-Controlling Interests – – – – – – – – – 2,000 2,000

Net Loss – – – – – – – ( 126,291 ) – ( 76 ) ( 126,367 )

Balance, December 31, 2021 30,337,914 $ 303 – $ – $ 739,495 – $ – $ ( 595,848 ) $ ( 1,221 ) $ 1,924 $ 144,653

Shares Issued for Wow Acquisition 1,105,708 11 1 – 11,543 – – – – – 11,554

5 unchanged sentences

Share Based Compensation – – – – 10,895 – – – – – 10,895

Other Comprehensive Loss Total – – – – – – – – ( 8,704 ) – ( 8,704 )

Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss – – – – – – – – ( 5,361 ) – ( 5,361 )

Currency Translation Adjustment – – – – – – – – ( 3,343 ) – ( 3,343 )

Distributions to Non-Controlling Interest – – – – – – – – – ( 1,200 ) ( 1,200 )

1 unchanged sentence

Balance, December 31, 2022 31,918,552 $ 319 1 $ – $ 762,418 42,633 $ ( 290 ) $ ( 641,443 ) $ ( 9,925 ) $ 1,790 $ 112,869

Issuance of Common Stock for Services 481,850 – – – 1,105 – – – – – 1,105

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 418,648 31 – – ( 32 ) 32,840 ( 49 ) – – – ( 50 )

Fractional Shares Issued Upon Reverse Stock Split 117,144 – – – – – – – – – –

Proceeds From Warrant Exchange, Net 2,311,550 2 – – 4,854 – – – – – 4,856

Reclassification of Warrant Liability to Equity – – – – 2,969 – – – – – 2,969

Share Based Compensation – – – – 2,671 – – – – – 2,671

Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss – – – – 1 – – – 5,727 – 5,728

Currency Translation Adjustment – – – – – – – – 315 – 315

Net Loss – – – – – – – ( 77,103 ) – ( 99 ) ( 77,202 )

Balance, December 31, 2023 35,247,744 $ 352 1 $ – $ 773,986 75,473 $ ( 339 ) $ ( 718,546 ) $ ( 3,883 ) $ 1,691 $ 53,261

The accompanying notes are an integral part of these consolidated financial statements.

Genius Brands International, Inc.

Kartoon Studios, Inc.

Consolidated Statements of Cash Flows

9 unchanged sentences

Share Based Compensation Expense 2,671 10,895

Warrant Incentive Expense – 69,139

Impairment Loss on Intangible Assets 4,117 3,452

Impairment of Goodwill 4,857 4,778

Impairment of Film and Television Costs 6,911 6,816

Deferred Tax Benefit ( 45 ) –

(Gain) Loss on Revaluation of Equity Investments in Your Family Entertainment AG ( 1,392 ) 106

Unrealized (Gain) Loss on Foreign Currency Transactions 1,380 ( 6 )

Impairment of Intangible Assets 4,413 4,117

Impairment of Goodwill 33,534 4,857

Unrealized Loss on Foreign Currency for Goodwill 287 –

Impairment of Property and Equipment 134 –

Loss on Early Lease Termination 258 –

Warrant Expense 12,664 –

Deferred Income Taxes ( 973 ) ( 45 )

Marketing Expenses in Exchange for Stock 1,195 –

Gain on Revaluation of Equity Investments in Your Family Entertainment AG ( 2,314 ) ( 1,392 )

Unrealized (Gain) Loss on Foreign Currency of Equity Investments in Your Family Entertainment AG ( 533 ) 1,380

Gain on Warrant Revaluation ( 10,373 ) ( 557 )

Write-Off of Contingent Consideration Liability ( 1,340 ) ( 5,870 )

Realized Loss on Marketable Securities 4,496 413

Noncash Interest Expense 2,270 –

Write-Off of Contingent Consideration Liability – ( 1,340 )

Write-off of Disputed Trade Payable ( 925 ) –

Stock Issued for Services 1,105 312

Bad Debt Expense 337 22

Credit Loss Expense 401 337

Other Non-Cash Items ( 2 ) 18

21 unchanged sentences

Cash Payment for Ameba, net of Cash Acquired – ( 3,893 )

Cash Payment for ChizComm, net of Cash Acquired – ( 7,789 )

Investment in Marketable Securities – ( 305,387 )

Loans to Related Party ( 1,567 ) ( 1,276 )

Repayments from/(Loans to) Related Party for Note Receivables 1,333 ( 1,567 )

Proceeds from Principal Collections on Marketable Securities 460 7,876

Proceeds from Sales of Marketable Securities 14,112 186,165

Proceeds from Sales and Maturities of Marketable Securities 72,137 14,112

Investment in Intangible Assets, net – ( 22 )

Purchase of Property & Equipment ( 72 ) ( 592 )

Net Cash Used in Investing Activities ( 30,937 ) ( 128,732 )

Net Cash Provided by (Used in) Investing Activities $ 73,858 ( 30,937 )

Cash Flows from Financing Activities:

Proceeds from Margin Loan, net 53,077 6,392

(Repayments of)/Proceeds from Production Facilities, net 1,976 ( 1,100 )

Proceeds from Margin Loan 21,160 68,826

Repayments of Margin Loan ( 81,169 ) ( 13,479 )

Proceeds from Production Facilities 12,932 11,359

Repayment of Production Facilities ( 17,667 ) ( 9,383 )

Proceeds from Bank Indebtedness, net 1,122 225

Repayments of Notes Payable – ( 20 )

Repayment of Payroll Protection Plan – ( 366 )

Proceeds from Warrant Exchange, net 5,299 –

Principal Payments on Finance Lease Obligations ( 2,162 ) ( 1,310 )

Distributions to Noncontrolling Interests ( 1,200 ) –

Debt Issuance Costs ( 18 ) ( 54 )

Distributions to Non-Controlling Interest – ( 1,200 )

Repurchase of Common Stock – ( 285 )

Shares Withheld for Taxes on Vested Restricted Shares ( 49 ) ( 5 )

Proceeds From Warrant Exchange – 57,265

Payment for Warrant Put Option Exercise ( 250 ) ( 250 )

Net Cash Provided by Financing Activities 52,174 62,171

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 212 ) ( 16 )

Net Decrease in Cash, Cash Equivalents and Restricted Cash ( 2,628 ) ( 90,396 )

Beginning Cash, Cash Equivalents and Restricted Cash 10,060 100,456

Ending Cash, Cash Equivalents and Restricted Cash 7,432 $ 10,060

Net Cash Provided by (Used in) Financing Activities $ ( 60,802 ) 54,444

Effect of Exchange Rate Changes on Cash ( 301 ) ( 212 )

Net Decrease in Cash ( 3,337 ) ( 2,628 )

Beginning Cash 7,432 10,060

Ending Cash $ 4,095 $ 7,432

Supplemental Disclosures of Cash Flow Information

Cash Paid for Interest $ 1,822 $ 252

Cash Paid for Income Taxes $ 19 $ –

Schedule of Non-Cash Financing and Investing Activities

Shares Issued for Wow Acquisition 11,554 –

FV of Replacement Options Granted Related to Wow Acquisition 1,213 –

Cash Paid for Taxes $ 64 $ 19

Non-Cash Operating Activities

Reduction in Leased Asset Due to Modified Lease Liability $ 219 $ –

Non-Cash Financing and Investing Activities

Leased Assets Obtained in Exchange for New Finance Lease Liabilities $ 1,432 $ 582

Shares Issued for ChizComm Acquisition – 3,527

Shares Issued for YFE Investment – 3,409

Liability for Acquisition Earnout Shares – 7,210

Non-cash Investment in Intangible Asset – 2,000

Non-cash Contributions from non-controlling Interests – ( 2,000 )

Warrants Issued for Services $ 443 $ –

Shares Issued for Wow Acquisition $ – $ 11,554

Fair Value of Replacement Options Granted Related to Wow Acquisition $ – $ 1,213

Warrant Modification $ 3,510 $ –

The accompanying notes are an integral part of these consolidated financial statements.

Genius Brands International, Inc.

And Subsidiaries

Kartoon Studios, Inc.

Notes to Consolidated Financial Statements

2 unchanged sentences

Organization and Nature of Business

Genius Brands International, Inc.

(“we,” “us,” “our,” or the “Company”) is a global content and brand management company that creates, produces, licenses, and broadcasts timeless and educational, multimedia animated content for children.

Led by experienced industry personnel, the Company distributes its content primarily on streaming platforms and television and licenses its properties for a broad range of consumer products based on the Company’s characters.

Kartoon Studios, Inc.

(formerly known as Genius Brands International, Inc.) (the “Company” or “we,” “us” or “our”) is a global content and brand management company that creates, produces, licenses, and broadcasts timeless and educational, multimedia animated content for children.

Led by experienced industry personnel, the Company distributes its content primarily on streaming platforms and television, and licenses properties for a broad range of consumer products based on the Company’s characters.

The Company is a “work for hire” producer for many of the streaming outlets and animated content intellectual property (“IP”) holders.

In the children’s media sector, the Company’s portfolio features “content with a purpose” for toddlers to tweens, providing enrichment as well as entertainment.

With the exception of the Company's recent acquisition of Wow Unlimited Media Inc.

and related titles, the Company’s programs, along with those programs it licenses, are being broadcast in the United States on the Company’s wholly-owned advertisement supported video on demand (“AVOD”) service, its free ad supported TV ("FAST") channels, and its subscription video on demand (“SVOD”) outlets, Kartoon Channel!

These streaming services are available on Apple TV, Apple iOS, Android TV, Android mobile, Amazon Prime, Amazon Fire, Tubi, Roku, Comcast, Cox, Dish/Sling, Xumo, Pluto, Samsung Smart TVs, LG Smart TVs, as well as YouTube, among other platforms.

The Company's in-house owned and produced animated shows include Stan Lee’s Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama starring Jennifer Garner, Rainbow Rangers, KC Pop Quiz , and the upcoming Shaq’s Garage starring Shaquille O’Neal, scheduled to debut in the second quarter of 2023.

With the exception of selected WOW Unlimited Media Inc.

(“Wow”) titles, the Company’s programs, along with licensed programs, are being broadcast in the United States on the Company’s wholly-owned advertisement supported video on demand (“AVOD”) service, its free ad supported TV (“FAST”) channels and subscription video on demand (“SVOD”) outlets, Kartoon Channel!

and Ameba TV, as well as linear streaming platforms .

These streaming platforms include Comcast, Cox, DISH, Sling TV, Amazon Prime Video, Amazon Fire, Roku, Apple TV, Apple iOS, Android TV, Android mobile, Pluto TV, Xumo, Tubi, YouTube, YouTube Kids and via KartoonChannel.com, as well as Samsung and LG smart TVs.

The Company’s library titles include the award-winning Baby Genius , adventure comedy Thomas Edison’s Secret Lab®, and Warren Buffett’s Secret Millionaires Club , created with and starring iconic investor Warren Buffett, Team Zenko Go!, Reboot , Bee & PuppyCat:

Lazy in Space and C astlevania .

The Company also licenses its programs to other services worldwide, in addition to the operation of its own channels, including but not limited to Netflix, HBO Max, Paramount+, Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.

Through the Company’s investments in Germany’s Your Family Entertainment (“YFE”), a publicly traded company on the Frankfurt Exchange (RTV-Frankfurt), it has gained access to one of the largest animation catalogues in Europe with over 50 titles consisting of over 1,600 episodes, and a global distribution network which currently covers over 60 territories worldwide.

Through the ownership of WOW Unlimited Media Inc.

(“Wow”), the Company established an affiliate relationship with Mainframe Studios, which is one of the largest animation producers in the world.

Lazy in Space and Castlevania .

The Company also licenses its programs to other services worldwide, in addition to the operation of its own channels, including, but not limited to, Netflix, Paramount+, Max, Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.

Through the Company’s investments in Germany’s Your Family Entertainment AG (“YFE”), a publicly traded company on the Frankfurt Stock Exchange (RTV-Frankfurt), it has gained access to one of the largest animation catalogues in Europe with over 50 titles consisting of over 1,600 episodes, and a global distribution network which currently covers over 60 territories worldwide.

Through the ownership of Wow, the Company established an affiliate relationship with Mainframe Studios, which is one of the largest animation producers in the world.

In addition, Wow owns Frederator Networks Inc.

(“Frederator”) and its Channel Frederator Network , the largest animation focused multi-channel network on YouTube with over 2,500 channels.

The Company has rights to a select amount of valuable IP, including among them a controlling interest in Stan Lee Universe (“SLU”), through which it controls the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”).

The Company also owns Beacon Media Group ("Beacon"), the largest media buying service for children in North America.

Beacon represents over 30 major toy companies, including Playmobile, Bandai Toys, Bazooka, Moose Toys, and JAKKS Pacific.

Frederator also owns Frederator Studios, focused on developing and producing shorts and series for and with partners.

Over the past 20 years, Frederator Studios has partnered with Nickelodeon, Nick Jr., Netflix, Sony Pictures Animation and Amazon.

The Company has rights to a select amount of valuable IP, including among them a controlling interest in Stan Lee Universe, LLC (“SLU”), through which it controls the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”).

The Company also owns The Beacon Media Group, LLC (“Beacon Media”) and The Beacon Communications Group, Ltd.

(“Beacon Communications”) (collectively, “Beacon”), a leading North American marketing and media agency and its first-class media research, planning and buying division.

Beacon represents over 30 kids and family clients, including Bandai Namco, Moose Toys, Bazooka Candy Brands and Playmobil.

In addition, the Company owns the Canadian company Ameba Inc.

(“Ameba”), which distributes a profitable SVOD service for kids, and has become the focal point of revenue growth for Genius Networks’ subscription offering.

The Company and its affiliates provide world class animation production studios, a catalogue representing thousands of hours of premium global content for children, a broadcast system for delivering that content and an in-house consumer products licensing infrastructure to fully exploit the content.

Recent Developments

On February 6, 2023, the Company's board of directors approved a 1-for-10 reverse stock split of the Company's outstanding shares of common stock.

The reverse stock split was effected on February 10, 2023 at 5:00 p.m.

Eastern time.

At the effective time, every 10 issued and outstanding shares of the Company's common stock were converted into 1 share

of common stock.

Any fractional shares of common stock resulting from the reverse stock split were rounded up to the nearest whole post-split share and no shareholders received cash in lieu of fractional shares.

The par value of each share of common stock remained unchanged.

The reverse stock split proportionately reduced the number of shares of authorized common stock from 400,000,000 to 40,000,000 shares.

The reverse stock split also applied to common stock issuable upon the exercise of the Company's outstanding warrants and stock options.

The reverse stock split did not affect the authorized preferred stock of 10,000,001 shares.

Unless noted, all references to shares of common stock and per share amounts contained in this Annual Report on Form 10-K have been retroactively adjusted to reflect a 1-for-10 reverse stock split.

2022 Investments

On January 13, 2022, the Company acquired Ameba and gained access to its kid-safe platform technology and 13,000 episodes of owned and licensed content.

Refer to Note 3 for additional details.

On April 6, 2022, the Company completed the acquisition of Wow.

On October 26, 2021, the Company’s wholly-owned subsidiary, 1326919 B.C.

LTD., a corporation existing under the laws of the Province of British Columbia and Wow, entered into an Arrangement Agreement to effect a plan of arrangement under the arrangement provisions of Part 9, Division 5 of the Business Corporations Act.

The Company purchased 100 % of the issued and outstanding shares of Wow, including Wow's subsidiary Frederator, for $ 38.3 million in cash and 1,105,708 shares of the Company's common stock.

The plan of arrangement and final agreement, together with the acquisition of Wow’s Mainframe Studios and its subsidiary Frederator, are referred to as the “Wow Acquisition.” Refer to Note 3 for additional details.

On December 1, 2021, the Company completed a $ 6.8 million investment in YFE.

In exchange for $ 3.4 million in cash and 228,127 shares of the Company’s common stock (valued at approximately $ 3.4 million), the Company received 3,000,500 shares of YFE’s common stock, a 28.7 % ownership in YFE.

Following the initial equity investment in YFE, the Company participated in a mandatory tender offer for the remaining publicly traded shares held by YFE shareholders.

Upon the expiration of the offer on February 14, 2022, the Company purchased an additional 2,637,717 shares of YFE at 2.00 EUROS per share or 5.3 million EUROS ($ 6.0 million USD) in the aggregate.

On March 9, 2022, bonds held by YFE shareholders were converted into 2,573,800 shares of YFE common stock, 304,431 of which were purchased by the Company, at 2.00 EUROS per share or 0.6 million EUROS ($ 0.7 million USD).

On April 5, 2022, the Company exercised its subscription rights to purchase an additional 914,284 shares of YFE’s common stock at 3.00 EUROS per share, or 2.7 million EUROS ($ 2.9 million USD), increasing the number of YFE’s outstanding shares to 6,857,132 .

During the fourth quarter of 2022, the Company did not take part in a round of financing raised by YFE which increased YFE's outstanding shares and therefore decreased the Company’s ownership in YFE from 48.0 % to 44.8 % as of December 31, 2022.

During the year ended December 31, 2022, the Company’s cash, cash equivalents and restricted cash decreased by $ 2.6 million.

The decrease was primarily due to cash used in investment activities, inclusive of the Wow and Ameba acquisitions and the YFE investments, totaling $ 30.9 million, $ 23.7 million used in operational activities, 1.3 million of principal payments made on finance leases and $ 1.2 million distributed to SLU.

Cash used was offset by $ 55.3 million of proceeds provided by the margin loan, production facilities and bank indebtedness, net of repayments.

As of December 31, 2022, the Company held available-for-sale marketable securities with a fair value of $ 83.7 million, a decrease of $ 28.8 million as compared to December 31, 2021.

The decrease was primarily due to selling $ 14.1 million securities during the year, additional prepayment proceeds of $ 7.9 million on principals for certain mortgage-backed securities and an increase in unrealized loss of $ 5.4 million for the securities still held.

(“Ameba”), which distributes SVOD service for kids and has become a focal point of revenue for TOON Media Networks’ subscription offering.

On June 23, 2023, the Company was renamed Kartoon Studios, Inc.

On June 26, 2023, the Company transferred its listing to NYSE American LLC (“NYSE American”).

In connection with listing on NYSE American, the Company voluntarily delisted from the Nasdaq Capital Market (“Nasdaq”).

The Company’s common stock began trading on NYSE American under the new symbol “TOON” on June 26, 2023.

Recent Transactions

Exercise of 2021 Warrants and Issuance of New Warrants

On June 26, 2023, the Company entered into warrant exercise inducement offer letters (the “Letter Agreements”) with certain existing institutional and accredited investors pursuant to which such investors agreed to exercise for cash certain warrants issued by the Company in January 2021 (the “2021 Warrants”) to purchase 2,311,550 shares of common stock (the “Exercise”).

To induce the Exercise by holders of the 2021 Warrants, the Company also amended the exercise price of the 2021 Warrants from $ 23.70 per share (as adjusted pursuant to a 1-for-10 reverse stock split of our outstanding shares of common stock effected on February 10, 2023) to $ 2.50 per share pursuant to the terms of the 2021 Warrants.

In consideration for the Exercise, the exercising holders received warrants to purchase up to 4,623,100 shares of common stock, and The Special Equities Group, LLC, a division of Dawson James Securities, Inc.

(“SEG”) which acted as the warrant solicitation agent for the Exercise, received a warrant to purchase up to 161,809 shares of common stock (collectively, the “Warrants”).

The Warrants are exercisable at any time beginning on November 1, 2023 (i.e., the date stockholder approval was received as described therein) (the “Initial Exercise Date”) and ends on the fifth anniversary of the Initial Exercise Date at a price per share of $ 2.50 .

Pursuant to the Letter Agreements, the Company filed a registration statement on Form S-3 covering the resale of the shares of common stock issuable upon the exercise of the Warrants on July 26, 2023.

Declaration of Series C Preferred Stock Dividend;

Redemption of Series C Preferred Stock

On September 21, 2023, the Company’s board of directors declared a dividend of one one-thousandth of a share of Series C Preferred Stock, par value $ 0.001 per share (“Series C Preferred Stock”), for each outstanding share of the Company’s common stock, par value $ 0.001 per share to stockholders of record on October 2, 2023 (the “Record Date”).

Each share of Series C Preferred Stock would entitle the holder thereof to 1,000,000 votes per share (and, for the avoidance of doubt, each fraction of a share of Series C Preferred Stock would have a ratable number of votes).

Thus, each one-thousandth of a share of Series C Preferred Stock would entitle the holder thereof to 1,000 votes.

The outstanding shares of Series C Preferred Stock would vote together with the outstanding shares of common stock as a single class exclusively with respect to the approval of the proposal (the “Share Increase Proposal”) to amend the Company’s Articles of Incorporation to increase the authorized shares of common stock from 40,000,000 shares to 190,000,000 shares with a corresponding increase in the total number of authorized shares of capital stock from 50,000,000 shares to 200,000,000 shares (the “Share Increase Amendment”) and any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Share Increase Amendment (the “Adjournment Proposal” and together with the Share Increase Proposal, the “Proposals”).

The Series C Preferred Stock would not be entitled to vote on any other matter, except to the extent required under Chapter 78 of the Nevada Revised Statues.

The Company held a special meeting of stockholders on November 1, 2023 (the “Special Meeting”), at which both Proposals were approved by the stockholders.

All shares of Series C Preferred Stock that had not been duly voted by proxy prior to the opening of the Special Meeting were automatically redeemed in whole, but not in part, by the Company as of immediately prior to the opening of such meeting.

Any outstanding shares of Series C Preferred Stock that had not been redeemed prior to the opening of the Special Meeting were redeemed in whole, but not in part, automatically upon the approval of the Share Increase Proposal by the stockholders.

Each share of Series C Preferred Stock was redeemed in consideration for the right to receive an amount equal to $ 0.01 in cash for each ten whole shares of Series C Preferred Stock that had been held as of immediately prior to the applicable redemption.

However, the redemption consideration in respect of the shares of Series C Preferred Stock (or fractions thereof) was only payable to such owners on the number of shares owned and redeemed pursuant to the redemptions rounded down to the nearest whole number that is a multiple of ten (such, that for example, an owner of 25 shares of Series C Preferred Stock redeemed was entitled to receive cash payment only on redemption of 20 shares of Series C Preferred Stock).

As of December 31, 2023, the Company had cash of $ 4.1 million, which decreased by $ 3.3 million as compared to December 31, 2022.

The decrease was primarily due to cash used in financing activities of $ 60.8 million and cash used in operating activities of $ 16.1 million, offset by cash provided by investing activities of $ 73.9 million.

The cash used in financing activities was primarily due to repayment of the margin loan, production facilities and bank indebtedness, net proceeds of $ 63.6 million and payments on finance leases of $ 2.2 million, offset by cash received from the warrant

exchange of $ 5.3 million.

The cash provided by investing activities was due to sales and maturities of marketable securities of $ 72.1 million.

As of December 31, 2023, the Company held available-for-sale marketable securities with a fair value of $ 12.0 million, a decrease of $ 71.8 million as compared to December 31, 2022 due to sales and maturities during the year ended December 31, 2023.

The available-for-sale securities consist principally of corporate and government debt securities and are also available as a source of liquidity.

The Company borrowed an additional $ 68.8 million from its investment margin account during the year ended December 31, 2022 and repaid $ 15.7 million with cash received from sales and/or redemptions of its marketable securities.

During the year ended December 31, 2022, the borrowed amounts were primarily used to finance the Company’s additional investments in YFE and the closing of the acquisitions of Ameba and Wow, with the remaining borrowing used for operational costs, in each case pledging certain of its marketable securities as collateral.

The interest rate for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 0.65 % with interest only payable monthly.

The weighted average interest rate was 2.59 % and 0.72 % on an average margin loan balance of $ 48.2 million and $ 5.9 million during the years ended December 31, 2022 and December 31, 2021, respectively.

The Company incurred interest expense on the loan of $ 1.3 million during the year ended December 31, 2022.

The amount of interest incurred on the margin loan during the year ended December 31, 2021 was insignificant.

The investment margin account borrowings do not mature but are payable on demand as the custodian can issue a margin call at any time, therefore the margin loan is

recorded as a current liability on the Company’s consolidated balance sheets.

As of December 31, 2023 and December 31, 2022, the Company’s margin loan balance was $ 0.8 million and $ 60.8 million, respectively.

Upon the acquisition of Wow, the Company assumed certain credit facilities (the “Facilities”).

The Facilities are comprised of:

(i) an $ 8.0 million CAD revolving demand facility, (ii) a $ 4.3 million CAD equipment lease line, (iii) a treasury risk management facility for foreign exchange forward contracts, (iv) interim financing facilities for specific production titles and (v) a $ 1.4 million CAD equipment lease facility, separate from the equipment lease line.

Refer to Note 13 for additional details.

During the year ended December 31, 2023, the Company borrowed an additional $ 21.2 million from its investment margin account and repaid $ 81.2 million primarily with cash received from sales and maturities of marketable securities.

The borrowed amounts were primarily used for operational costs.

The interest rates for the borrowings fluctuate based on the Fed Funds Upper Target plus 0.60 %.

The weighted average interest rates were 0.98 % and 1.66 %, respectively, on average margin loan balances of $ 27.4 million and $ 27.1 million as of December 31, 2023 and December 31, 2022, respectively.

The Company incurred interest expense on the loan of $ 1.5 million and $ 1.3 million during the years ended December 31, 2023 and December 31, 2022, respectively.

The investment margin account borrowings do not mature but are collateralized by the marketable securities held by the same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan.

Due to the call option, the margin loan is recorded as a current liability on the Company’s consolidated balance sheets.

The Company is subject to financial and customary affirmative and negative non-financial covenants on the revolving demand facility, revolving equipment lease line and treasury risk management facility that have an aggregate total outstanding balance of $ 4.2 million U.S.

dollars (“USD”) or $ 5.5 million Canadian dollars (“CAD”).

The Company was in technical violation of two financial covenants requiring a minimum fixed charge ratio and a maximum senior funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio as of December 31, 2023.

The Company has continued to make its regular principal and interest payments in a timely basis since the effective borrowing date.

The revolving demand facility and the treasury risk management facility can be called at any time by the lender as per the original terms of the facilities.

The risk of the lender demanding repayment can be deemed greater due to the breach of covenants.

Subsequent to December 31, 2023, the Company amended the revolving demand facility, equipment lease line, and treasury risk management facility during March 2024.

As a result of the amendment, the revolving demand facility allows for draws of up to CAD 1.0 million to be made by way of CAD prime rate loans, CAD overdrafts, USD base rate loans or letters of credit up to a maximum of $ 200,000 in either CAD or USD and having a term of up to 1 year.

The CAD prime borrowings and overdrafts bear interest at a rate equal to bank prime plus 2.00 % per annum.

The USD base rate borrowings bear interest at a rate equal to bank base rate plus 2.00 % per annum.

The equipment lease line was amended to set the maximum that can be borrowed under the equipment lease line to CAD 1.6 million.

As at December 31, 2023, the Company has drawn down the maximum of CAD 1.6 million under the equipment lease line.

The Company has and will continue to make the regular principal and interest payments under the specific financing terms of the existing equipment lease agreements.

The amendment removed the treasury risk management facility that allowed for advances of up to CAD 0.5 million.

As of December 31, 2023 and the date of the amendment, there were no outstanding amounts drawn under the treasury risk management facility.

The amendment also introduced revised financial covenants that are effective as of March 15, 2024.

The amendment did not have any impact on the Company’s existing production facilities that are separate from the revolving demand facility and are used for financing specific productions.

Historically, the Company has incurred net losses.

For the years ended December 31, 2022, and December 31, 2021, the Company reported net losses of $ 45.6 million and $ 126.3 million, respectively.

The Company reported net cash used in operating activities of $ 23.7 million and $ 23.8 million for the years ended December 31, 2022, and December 31, 2021, respectively.

For the years ended December 31, 2023 and 2022, the Company reported net losses of $ 77.2 million and $ 44.5 million, respectively.

The Company reported net cash used in operating activities of $ 16.1 million and $ 25.9 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company had an accumulated deficit of $ 718.5 million and total stockholders’ equity of $ 53.3 million.

As of December 31, 2022, the Company had current assets of $ 139.5 million, including cash and cash equivalents of $ 7.4 million and marketable securities of $ 83.7 million, and current liabilities of $ 110.9 million.

As of December 31, 2023, the Company had current assets of $ 57.1 million, including cash of $ 4.1 million and marketable securities of $ 11.9 million, and current liabilities of $ 45.6 million.

The Company had working capital of $ 11.5 million as of December 31, 2023, compared to working capital of $ 28.6 million as of December 31, 2022.

Management has evaluated the significance of these conditions in relation to the Company’s ability to meet its obligations and noted the Company has sufficient marketable securities and investments to fund operations for the next 12 months.

In addition, the Company has the ability to reduce operating costs and use equity and equity-linked instruments to pay for services and compensation.

Summary of Significant Accounting Policies

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Generally Accepted Accounting Principles (“GAAP”).

The accompanying consolidated financial statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to state fairly the Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows for all periods presented.

Certain prior period amounts have been reclassified for consistency with the current period presentation.

These reclassifications had no effect on the reported results of operations.

The Company determined its operating segments on the same basis that it assesses performance and makes operating decisions.

Reclassifications

Certain prior period amounts included within the statement of cash flows have been reclassified or presented to conform with the current period presentation.

The reclassifications and changes in presentation had no impact on the Company's net loss or balance sheet.

Restatement of Previously Issued 2022 Financial Statements and Unaudited Interim 2023 Financial Statements

During the course of our financial reporting close for the 2023 financial statements, the Company identified various errors associated with its 2022 annual and 2023 previously reported consolidated financial statements as noted below.

The consolidated balance sheet as of December 31, 2022 includes a correction of an error identified during the fourth quarter of fiscal year December 31, 2023.

The error is related to an understatement of Deferred Tax Liability, net of $ 1.7 million with a corresponding increase to goodwill that were omitted from the Company’s business combination accounting associated with the acquisition of Wow and Frederator in April of 2022.

Refer to Note 9 for details related to the goodwill and intangible asset balances and Note 18 related to income taxes.

During the first quarter of 2023, the Frederator indefinite-lived intangible asset was determined to be impaired as previously reported.

In correction of the error in 2022 which established the deferred tax liability balance associated with the tradename, as noted above, the Company would have decreased the deferred tax liability by $ 0.2 million and record a corresponding increase to Income Tax Benefit on the unaudited condensed consolidated statement of operations for the three months ended March 31, 2023.

During the second quarter of 2023, the Company identified an error in the Company’s unaudited condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2023 and the unaudited condensed consolidated balance sheet as of March 31, 2023.

The Company’s Deferred Tax Liability, net and Net Loss for the period ended March 31, 2023 were overstated by $ 0.7 million.

The consolidated statement of operations for the year ended 2023 and the consolidated balance sheet as of December 31, 2023 include the correction of an error identified during the fourth quarter of fiscal year 2023.

The error is related to an overstatement of Warrant Incentive Expense recorded within Other Income (Expense), net and Additional Paid-in-Capital of $ 3.5 million associated with the warrant modification in June 2023.

In accordance with U.S.

Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No.

99, Materiality (“SAB 99”), codified in Financial Accounting Standards Boards’ (“FASB”) Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections (“ASC 250”), the Company evaluated the materiality of the above errors from a quantitative and qualitative perspective and concluded that the errors were material to the Company’s 2022 consolidated financial statements and the 2022 and 2023 condensed interim consolidated financial statements and the financial statements should be restated to present the identified adjustments.

The Company has not filed, and does not intend to file, amendments to the previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2022 and 2023 and September 30, 2022 and 2023 or Annual Report on Form 10-K for 2022, but instead is restating the consolidated financial statements in this Annual Report on Form 10-K.

The following tables show the Company’s 2022 unaudited condensed consolidated balance sheets as of June 30, 2022 and September 30, 2022 and the audited consolidated balance sheet as of December 31, 2022 and the Company’s 2023 unaudited condensed consolidated financial statements as of and for the three month period ended March 31, 2023, as of and for the three and six months period ended June 30, 2023 and as of and for the nine months period ended September 30, 2023 as previously reported, adjustments and as restated for the periods presented:

As of June 30, 2022

As Previously Reported Adjustments As Restated

Total Assets (in thousands)

Goodwill $ 36,720 1,667 $ 38,387

Total Assets $ 272,342 1,667 $ 274,009

Total Liabilities

Deferred Tax Liability $ – 1,667 $ 1,667

Total Liabilities $ 129,255 1,667 $ 130,922

As of September 30, 2022

As Previously Reported Adjustments As Restated

(in thousands)

Goodwill $ 35,748 1,667 $ 37,415

Total Assets $ 253,991 1,667 $ 255,658

Total Liabilities

Deferred Tax Liability $ – 1,667 $ 1,667

Total Liabilities $ 125,533 1,667 $ 127,200

As of December 31, 2022

As Previously Reported Adjustments As Restated

(in thousands)

Goodwill $ 31,807 1,667 $ 33,474

Total Assets $ 237,918 1,667 $ 239,585

Total Liabilities

Deferred Tax Liability $ 705 1,667 $ 2,372

Total Liabilities $ 125,049 1,667 $ 126,716

As of March 31, 2023

As Previously Reported Adjustments As Restated

(in thousands)

Goodwill $ 20,520 1,667 $ 22,187

Total Assets $ 196,560 1,667 $ 198,227

Total Liabilities

Deferred Tax Liability $ 705 733 $ 1,438

Total Liabilities $ 105,213 733 $ 105,946

Stockholders' Equity

Accumulated Deficit $ ( 666,205 ) 934 $ ( 665,271 )

Total Stockholders' Equity $ 91,347 934 $ 92,281

Three Months Ended March 31, 2023

As Previously Reported Adjustments As Restated

(in thousands, except share and per share data)

Net Loss Attributable to Kartoon Studios, Inc.

Income Tax Benefit (Expense) $ – 934 $ 934

Net Loss $ ( 24,793 ) 934 $ ( 23,859 )

Net Loss Attributable to Kartoon Studios, Inc.

$ ( 24,762 ) 934 $ ( 23,828 )

Net Loss per Share (Basic) $ ( 0.77 ) 0.03 $ ( 0.74 )

Net Loss per Share (Diluted) $ ( 0.77 ) 0.03 $ ( 0.74 )

Weighted Average Shares Outstanding (Basic) 31,978,335 31,978,335

Weighted Average Shares Outstanding (Diluted) 31,978,335 31,978,335

As of June 30, 2023

As Previously Reported Adjustments As Restated

(in thousands)

Goodwill $ 20,852 1,667 $ 22,519

Total Assets $ 177,983 1,667 $ 179,650

Total Liabilities

Deferred Tax Liability $ – 1,438 $ 1,438

Total Liabilities $ 90,470 1,438 $ 91,908

Stockholders' Equity

Additional Paid-in-Capital $ 773,377 ( 3,510 ) $ 769,867

Accumulated Deficit $ ( 681,435 ) 3,739 $ ( 677,696 )

Total Stockholders' Equity $ 87,513 229 $ 87,742

Three Months Ended June 30, 2023

As Previously Reported Adjustments As Restated

(in thousands, except share and per share data)

Net Loss Attributable to Kartoon Studios, Inc.

Other Income (Expense) $ ( 6,368 ) 3,510 $ ( 2,858 )

Income Tax Benefit (Expense) $ 705 ( 705 ) $ –

Net Loss $ ( 15,246 ) 2,805 $ ( 12,441 )

Net Loss Attributable to Kartoon Studios, Inc.

$ ( 15,230 ) 2,805 $ ( 12,425 )

Net Loss per Share (Basic) $ ( 0.47 ) 0.09 $ ( 0.38 )

Net Loss per Share (Diluted) $ ( 0.47 ) 0.09 $ ( 0.38 )

Weighted Average Shares Outstanding (Basic) 32,379,852 32,379,852

Weighted Average Shares Outstanding (Diluted) 32,379,852 32,379,852

Six Months Ended June 30, 2023

As Previously Reported Adjustments As Restated

(in thousands, except share and per share data)

Net Loss Attributable to Kartoon Studios, Inc.

Other Income (Expense) $ ( 8,080 ) 3,510 $ ( 4,570 )

Income Tax Benefit (Expense) $ 705 229 $ 934

Net Loss $ ( 40,039 ) 3,739 $ ( 36,300 )

Net Loss Attributable to Kartoon Studios, Inc.

$ ( 39,992 ) 3,739 $ ( 36,253 )

Net Loss per Share (Basic) $ ( 1.24 ) 0.12 $ ( 1.12 )

Net Loss per Share (Diluted) $ ( 1.24 ) 0.12 $ ( 1.12 )

Weighted Average Shares Outstanding (Basic) 32,180,202 32,180,202

Weighted Average Shares Outstanding (Diluted) 32,180,202 32,180,202

As of September 30, 2023

As Previously Reported Adjustments As Restated

(in thousands)

Goodwill $ 20,569 1,667 $ 22,236

Total Assets $ 136,174 1,667 $ 137,841

Total Liabilities

Deferred Tax Liability $ – 1,438 $ 1,438

Total Liabilities $ 62,163 1,438 $ 63,601

Stockholders' Equity

Additional Paid-in-Capital $ 773,885 ( 3,510 ) $ 770,375

Accumulated Deficit $ ( 696,911 ) 3,739 $ ( 693,172 )

Total Stockholders' Equity $ 74,011 229 $ 74,240

Nine Months Ended September 30, 2023

As Previously Reported Adjustments As Restated

(in thousands, except share and per share data)

Net Loss Attributable to Kartoon Studios, Inc.

Other Income (Expense) $ ( 10,293 ) 3,510 $ ( 6,783 )

Income Tax Benefit (Expense) $ 705 229 $ 934

Net Loss $ ( 55,551 ) 3,739 $ ( 51,812 )

Net Loss Attributable to Kartoon Studios, Inc.

$ ( 55,468 ) 3,739 $ ( 51,729 )

Net Loss per Share (Basic) $ ( 1.67 ) 0.11 $ ( 1.56 )

Net Loss per Share (Diluted) $ ( 1.67 ) 0.11 $ ( 1.56 )

Weighted Average Shares Outstanding (Basic) 33,160,228 33,160,228

Weighted Average Shares Outstanding (Diluted) 33,160,228 33,160,228

The Company determines its operating segments on the same basis as it assesses performance and makes operating decisions.

The Company principally operates in two distinct business segments:

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Principles of Consolidation and Basis of Presentation

The Company’s consolidated financial statements include the accounts of Genius Brands International, Inc.

The Company’s consolidated financial statements include the accounts of Kartoon Studios, Inc.

and its wholly-owned subsidiaries.

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Non-consolidated investments are accounted for using the equity method or the fair value option and recorded at fair value with changes recognized within Other Income (Expense), net on the consolidated statements of operations and comprehensive income (loss).

All significant intercompany accounts and transactions have been eliminated in consolidation.

All significant intercompany accounts and transactions have been eliminated upon consolidation.

Business Combinations

The Company accounts for transactions that are classified as business combinations in accordance with the Financial Accounting Standards Boards’ (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) .

The Company accounts for transactions that are classified as business combinations in accordance with FASB ASC 805, Business Combinations (“ASC 805”) .

Once a business is acquired, the Company allocates the fair value of the purchase consideration to the tangible assets, liabilities, and intangible assets acquired based on their estimated fair values.

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The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires significant estimates such as future expected revenue, expenses, capital expenditures and other costs, and discount rates.

The Company estimates the fair value based upon assumptions management believes to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

The Company estimates the fair value based upon assumptions that management believes to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

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Variable Interest Entities

The Company holds an interest in Stan Lee University (“SLU”), an entity that is considered a variable interest entity (“VIE”).

The Company holds an interest in Stan Lee University, LLC (“SLU”), an entity that is considered a variable interest entity (“VIE”).

The variable interest relates to 50 % ownership in the entity that is comprised of the Stan Lee Assets and that requires additional financial support from the Company to continue operations.

The Company's investment in SLU was $ 0.8 million, net $ 1.2 million of distributions as of December 31, 2022 and $ 2.0 million as of December 31, 2021, respectively.

The Company is considered the primary beneficiary and is required to consolidate the VIE.

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

Foreign Currency

The Company considers the U.S.

dollar to be its functional currency for its United States and certain Canadian based operations.

The Canadian dollar is the functional currency of its Wow Mainframe Studio entity.

Accordingly, the financial information is translated from the Canadian dollar to the U.S.

dollar for inclusion in the Company’s consolidated financial statements.

The Company considers the USD to be its functional currency for its United States and certain Canadian based operations.

The CAD is the functional currency of Wow, a wholly-owned subsidiary of the Company.

Accordingly, the financial information is translated from CAD to USD for inclusion in the Company’s consolidated financial statements.

Revenue and expenses are translated at average exchange rates prevailing during the period, and assets and liabilities are translated at exchange rates in effect at the balance sheet date.

Resulting translation adjustments are included as a component of Accumulated Other Comprehensive Income (Loss), net in stockholders’ equity.

Foreign exchange transaction gains and losses are included in Other Income (Expense), Net on the consolidated statements of operations.

Foreign exchange (“FX”) transaction gains and losses are included in Other Income (Expense), net on the consolidated statements of operations.

Foreign Currency Forward Contracts

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Therefore, the Company presents the asset or liability position of the FX forwards that are with the same counterparty net as either an asset or liability in its consolidated balance sheets.

As of December 31, 2022, the gross amount of FX Forwards in an asset and liability position that were subject to a master netting arrangement was $ 12.9 million and $ 13.0 million, respectively, resulting in a liability recorded within Other Current Liabilities on the Company's consolidated balance sheet of $ 0.1 million.

The change in fair value of $ 0.1 million for the year ended December 31, 2022 was recorded as an unrealized loss within Production Services Revenue on the Company's consolidated statement of operations.

The Company did not hold FX Forwards prior to the Wow Acquisition.

As of December 31, 2023, the FX forward contracts were fully settled and netted to zero on the Company’s consolidated balance sheets.

The Company recorded a realized gain of $ 0.1 million within Production Services Revenue on the consolidated statement of operations.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents.

As of December 31, 2022 and December 31, 2021, the Company had cash and cash equivalents of $ 7.4 million and $ 2.1 million, respectively, that at times could exceed FDIC or CDIC limits..

Restricted Cash

The Company does not hold restricted cash as of December 31, 2022.

As of December 31, 2021 a restricted cash balance of $ 8.0 million was held in an escrow account for the future commitment of financing related to the Company's investment in YFE.

Allowance for Doubtful Accounts

Accounts receivable are presented on the consolidated balance sheets net of estimated uncollectible amounts.

As of December 31, 2023 and December 31, 2022, the Company had cash of $ 4.1 million and $ 7.4 million, respectively, that at times could exceed Federal Deposit Insurance Corporation (“FDIC”) or Canadian Deposit Insurance Corporation (“CDIC”) limits.

Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.

The availability of certain short-term lines of credit is dependent on the Company maintaining compensating balances.

The compensating balances are not legally restricted and may be withdrawn, therefore the Company classifies them as cash on the consolidated balance sheets.

December 31, 2023 and December 31, 2022, the total compensating balance maintained was $ 1.1 million.

The Company did not have any cash equivalents as of the periods presented.

Trade Accounts Receivable and Allowance for Credit Loss

Accounts receivables are presented on the consolidated balance sheets, net of estimated uncollectible amounts.

The carrying amounts of trade accounts receivable and unbilled accounts receivable represent the maximum credit risk exposure of these assets.

The Company evaluates its accounts receivable balances on a quarterly basis to determine collectability based on an assessment of past events, current economic conditions, and forecasts of future events.

The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses.

Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful.

At December 31, 2022 and 2021, the Company recorded an allowance for bad debt of $ 65,421 and $ 22,080 , respectively.

On a quarterly basis, in accordance with FASB ASC 326, Measurement of Credit Losses on Financial Instruments (“ASC 326”) , the Company evaluates the collectability of outstanding accounts receivable balances to determine an allowance for credit loss that reflects its best estimate of the lifetime expected credit losses.

The allowance for credit loss is based on an assessment of past events, current economic conditions, and forecasts of future events.

Individual uncollectible accounts are written off against the allowance when collection of the individual accounts does not appear probable.

As of December 31, 2023 and December 31, 2022, the Company recorded an allowance for credit loss of $ 189,245 and $ 65,421 , respectively.

The Company limits its exposure to this credit risk through a credit approval process and credit monitoring procedures.

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As this financing is fundamental to the Company’s ability to produce animated productions and generate revenue in the normal course of business, the normal operating cycle for such assets is considered to be a 12 to 24-month period, or the time it takes for the CRA to assess and refund the tax credits earned.

As of December 31, 2022, $ 26.3 million in current tax credit receivables related to Wow’s film and television productions was recorded, net of $ 0.2 million recorded as an allowance.

The allowance is related to uncertainties in tax credits applied for in the amount of $ 1.6 million with a Provincial government the Company has not yet established a history.

As of December 31, 2023 and December 31, 2022, $ 20.7 million and $ 26.3 million in current tax credit receivables related to Wow’s film and television productions were recorded, net of $ 0.5 million and $ 0.2 million, respectively, recorded as an allowance for credit loss.

It is estimated that the Company will collect the receivables balance, therefore no additional reserve was recorded.

Marketable Debt Securities

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Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.

Currently, the Company classifies its investments in marketable securities as “available-for-sale” and records these investments at fair value.

Currently, the Company classifies its investments in marketable securities as available-for-sale (“AFS”) and records these investments at fair value.

The securities are available to support current operations and, accordingly, the Company classifies the investments as current assets without regard to their contractual maturity.

Unrealized gains or losses on available-for-sale securities for which the Company expects to fully recover the amortized cost basis are recognized in accumulated other comprehensive (loss) income, a component of stockholders’ equity.

If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized as a loss in the consolidated statements of operations.

The Company reports accrued interest receivable separately from the available-for-sale securities and has elected not to measure an allowance for credit losses for accrued interest receivables.

Unrealized gains or losses on available-for-sale securities for which the Company expects to fully recover the amortized cost basis are recognized in Accumulated Other Comprehensive Income (Loss), a component of stockholders’

Gains and losses as a result of sales of securities are reclassified from previously unrealized gains and losses on AFS securities in Accumulated Other Comprehensive Income (Loss) to Other Income (Expense), net, in the consolidated statements of operations.

On a quarterly basis, the Company reviews its AFS securities to assess declines in fair value for credit losses.

For each AFS security with an amortized cost that exceeds its fair value, the Company first determines if it intends to sell or is more-likely-than-not required to sell the debt security before the expected recovery of its amortized cost.

If it intends to sell or will more-likely-than-not be required to sell the security, the Company recognizes the impairment as a credit loss in the consolidated statements of operations by writing down the security’s amortized cost to its fair value.

For AFS securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss.

The portion of the decline in fair value that is due to factors other than a credit loss is recognized in Accumulated Other Comprehensive Income (Loss) as an unrealized loss.

The Company reports accrued interest receivable separately from the AFS securities and has elected not to measure an allowance for credit losses for accrued interest receivables.

Uncollectible accrued interest is written off when the Company determines that no additional interest payments will be received.

Classified within Other Receivables on the consolidated balance sheets, approximately $ 0.3 million in interest income was receivable as of December 31, 2022.

Classified within Other Receivables on the consolidated balance sheets, approximately $ 54,642 and $ 0.3 million in interest income were receivable as of December 31, 2023 and December 31, 2022, respectively.

Interest earned on investment securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums accounted for over the life of the security or, in the case of callable securities, through the first call date, using the level yield method, with no prepayment anticipated.

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Property and Equipment

Property and equipment are recorded at cost.

Property and equipment are recorded at cost, less accumulated depreciation.

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to seven years .

Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred.

Gains and losses from any dispositions of property and equipment are reflected in the consolidated statement of operations.

Gains and losses from any dispositions of property and equipment are reflected in the consolidated statements of operations.

Whenever events or circumstances change, an assessment is made as to whether there has been impairment to the value of long-lived assets by determining whether projected undiscounted cash flows generated by the applicable asset exceed its net book value as of the assessment date.

Refer to Note 6 for details on the Company’s assessments of fair value during the years ended December 31, 2023 and December 31, 2022.

Right-of-Use Leased Assets

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The operating lease ROU assets also include any lease payments made prior to lease commencement date and excludes lease incentives.

Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that it will exercise the option.

Specific lease terms used in computing the ROU assets and lease liabilities may include options to extend or terminate the lease when the Company is reasonably certain that it will exercise the option.

The Company will reassess expected lease terms based on changes in circumstances that indicate options may be more or less likely to be exercised.

Lease expense is recognized on a straight-line basis over the lease term within General and Administrative Expenses on the consolidated statements of operations.

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Accordingly, production costs are capitalized at actual cost and amortized using the individual-film-forecast method, whereby these costs are amortized, and participations costs are accrued based on the ratio of the current period’s revenues to management’s estimate of ultimate revenue expected to be recognized from each production.

There are usually three stages for production projects with different costs incurred at each stage:

Productions in Development

Capitalized development costs are reclassified to productions in progress once the project is approved and physical production of the film or television program commences.

Development costs include the costs of acquiring film rights to books, scripts or original screenplays and the third-party costs to adapt such projects, including visual development and design.

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Productions in Progress

For the Company’s film and television programs in progress, capitalized costs include all direct production and financing costs incurred during production that are expected to provide future economic benefit to the Company.

Capitalized development costs are reclassified to productions in progress once the project is approved and physical production of the film or television program commences.

Capitalized costs include all direct production and financing costs incurred during production that are expected to provide future economic benefit to the Company.

Borrowing costs and depreciation are capitalized to the cost of a film or television program until substantially all of the activities necessary to prepare the film or television program for its use intended by management are complete.

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An impairment charge is recorded in the amount by which the unamortized costs exceed the estimated fair value.

These write-downs are included in amortization expense within Direct Operating Expenses on the consolidated statements of operations.

See further discussion in Note 9 for impairment charges recorded during the years ended December 31, 2022 and 2021.

These write-downs are included in amortization expense within Direct Operating Costs on the consolidated statements of operations.

All capitalized costs that exceed the initial market firm commitment revenue are expensed in the period of delivery of the episodes.

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After the initial release of the episodic series, the costs of significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred.

Refer to Note 8 for details.

Goodwill and Intangible Assets

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Annual amortization of these intangible assets is computed based on the straight-line method over the remaining economic life of the asset.

The Company has performed its annual impairment test on its goodwill and indefinite-lived intangible assets during the fourth quarter of the year ended December 31, 2022 and 2021.

Refer to Note 10 for details.

Refer to Note 9 for details on the Company’s assessments of fair value during the years ended December 31, 2023 and December 31, 2022.

Debt and Attached Equity-Linked Instruments

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If the instrument is considered indexed to the Company’s stock, the Company analyzes additional equity classification requirements per FASB ASC 815-40, Contract’s in Entity’s Own Equity .

When the requirements are met, the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no

subsequent re-measurement.

When the requirements are met, the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement.

When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings.

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Revenue Recognition

The Company accounts for revenue according to standard FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”).

The Company accounts for revenue according to FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Revenue is measured based on the consideration specified in a contract with a customer.

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The Company has identified the following material and distinct performance obligations:

• Provide animation production services.

• License rights to exploit Functional Intellectual Property (“functional IP” is defined as intellectual property that has significant standalone functionality, such as the ability to be played or aired.

• Providing animation production services

• Licensing rights to exploit Functional Intellectual Property (“functional IP” is defined as intellectual property that has significant standalone functionality, such as the ability to be played or aired.

Functional IP derives a substantial portion of its utility from its significant standalone functionality)

• License rights to exploit Symbolic Intellectual Property (“symbolic IP” is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities, such as the Company’s licensing and merchandising programs associated with its animated content).

• Provide media and advertising services to clients.

• Fixed and variable fee advertising and subscription-based revenue generated from the Genius Brands Kartoon Channel!, the Frederator owned and operated YouTube channels and revenues generated from the operation of its multi-channel network on YouTube .

• Options to renew or extend a contract at fixed terms.

(While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future).

• Options on future seasons of content at fixed terms.

(While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future).

• Licensing rights to exploit Symbolic Intellectual Property (“symbolic IP” is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities, such as the Company’s licensing and merchandising programs associated with its animated content)

• Providing media advisory and advertising services to clients

• Fixed and variable fee advertising and subscription-based revenue generated from the Kartoon Studios Kartoon Channel!, Ameba TV, the Frederator owned and operated YouTube channels and revenues generated from the operation of its multi-channel network, Channel Frederator Network, on YouTube

• Options to renew or extend a contract at fixed terms (while this performance obligation is not significant for the Company’s current contracts, it could become significant in the future)

• Options on future seasons of content at fixed terms (while this performance obligation is not significant for the Company’s current contracts, it could become significant in the future)

Production Services

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Revenue and the associated costs of such contracts are recognized over time on a percentage of completion basis - i.e., as the project is being produced, prior to it being delivered to the customer.

percentage-of-completion is calculated based upon the proportion of costs incurred cumulatively to total expected costs.

The percentage-of-completion is calculated based upon the proportion of costs incurred cumulatively to total expected costs.

Changes in revenue recognized as a result of adjustments to total expected costs are recognized in profit or loss on a prospective basis.

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The difference between contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue.

When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable within other receivables on the Company's consolidated balance sheet.

When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable within Other Receivable on the Company’s consolidated balance sheets.

Unbilled accounts receivables are transferred to accounts receivable when the Company has an unconditional right to consideration.

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The difference between contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue.

When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable within other receivables on the Company's consolidated balance sheet.

When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable within Other Receivable on the Company’s consolidated balance sheets.

Unbilled accounts receivables are transferred to accounts receivable when the Company has an unconditional right to consideration.

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For subscription-based revenue, revenue is recognized when a customer downloads the mobile device application and their credit card is charged.

Upon the acquisition of Wow, the Company generates advertising revenue from Frederator’s owned and operated YouTube channels as well as revenues generated from the operation of its multi-channel network on YouTube .

Revenue is recognized when services are provided in accordance with the Company’s agreement with YouTube, the price is fixed or determinable, and collection of the related receivable is probable.

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Product Sales

The Company recognizes revenue related to product sales when the Company completes its performance obligation, which is when the goods are transferred to the buyer.

The Company recognizes revenue related to product sales (e.g., apparel and collectibles) when the Company completes its performance obligation, which is when the goods are transferred to the buyer.

Media Advisory & Advertising Services

Media and Advertising Services

The Company provides media and advertising services to clients.

Revenue is recognized when the services are performed.

When the Company purchases advertising for clients on linear and across digital and streaming platforms and receives a commission, the commissions are recognized as revenue in the month the advertising is displayed.

The Company provides media advisory and advertising consulting services to clients.

Revenue is recognized when the services are performed or as paid through the monthly retainer.

When the Company purchases advertising for clients on

linear and across digital and streaming platforms and receives a commission, the commissions are recognized as revenue in the month the advertising is displayed.

Gross Versus Net Revenue Presentation

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Direct operating costs include costs of the Company’s product sales, non-capitalizable film costs, film and television cost amortization expense, impairment expenses related to film and television costs, and participation expense related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which the Company is obligated to share net profits of the properties on which they have rendered services.

Upon the acquisition of Wow, the Company also includes salaries and related service production employee costs as part of its direct operating costs.

Upon the acquisition of Wow, the Company also includes the salaries and related service production employee costs of Wow as part of its direct operating costs.

Share-Based Compensation

The Company issues stock-based awards to employees and non-employees that are generally in the form of stock options or restricted stock units (“RSUs”).

Share-based compensation cost is recorded for all options and awards based on the grant-date fair value of the award.

Share-based compensation cost is recorded for all options and RSUs based on the grant-date fair value of the award.

The fair value of stock options is estimated at the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which requires management to make assumptions with respect to the fair value on the grant date.

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The Company has elected to account for forfeitures when they occur.

The Company issues authorized shares available for issuance under the Company’s 2015 Incentive Plan and the Company’s 2020 Incentive Plan upon employees’ exercise of their stock options.

The Company issues authorized shares available for issuance under the Company’s 2020 Incentive Plan upon employees’ exercise of their stock options.

Debt Issuance Costs

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Debt issuance costs directly attributable to the acquisition or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale.

Debt issuance costs as of December 31, 2022 and 2021 were insignificant.

Debt issuance costs as of December 31, 2023 and December 31, 2022 were insignificant.

Earnings Per Share

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Diluted EPS is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate.

During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive.

During periods of net loss, all common stock equivalents are excluded from the diluted EPS

calculation because they are antidilutive.

For the years ended December 31, 2023 and 2022, all shares were deemed antidilutive.

Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates.

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The Company maintains its cash in bank deposit accounts which, at times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) or the Canadian Deposit Insurance Corporation’s (“CDIC”) insured amounts.

Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to $100,000 CAD.

As of December 31, 2022, the Company had twelve bank deposit accounts with an uninsured balance of $ 3.4 million.

The Company has a managed account and a brokerage account with a financial institution.

The managed account maintains our investments in marketable securities of $ 83.7 million as of December 31, 2022.

The brokerage account had a cash balance of $ 2.2 million as of December 31, 2022.

Assets in the managed account and brokerage account are protected by the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $250,000 for cash).

Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to CAD 0.1 million.

As of December 31, 2023 and December 31, 2022, the Company had ten and twelve bank deposit accounts with an aggregate uninsured balance of $ 2.5 million and $ 3.4 million, respectively.

The Company has a managed account with a financial institution.

The managed account maintains its investments in marketable securities of approximately $ 12.0 million and $ 83.7 million as of December 31, 2023 and December 31, 2022, respectively.

Assets in the managed account are protected by the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $250,000 for cash).

In addition, the financial institution provides additional “excess of SIPC” coverage which insures up to $1.0 billion.

As of December 31, 2022, the Company has not had account balances held at this financial institution that exceed the insured balances.

As of December 31, 2023 and December 31, 2022, the Company did not have account balances held at this financial institution that exceed the insured balances.

The Company’s investment portfolio consists of investment-grade securities diversified among security types, industries and issuers.

The Company’s policy limits the amount of credit exposure to any one security issue or issuer and the Company believes no significant concentration of credit risk exists with respect to these investments.

For fiscal year 2022, the Company had four customers, whose total revenue exceeded 10% of total consolidated revenue.

These customers accounted for 71.9 % of total revenue.

As of December 31, 2022, the Company had two customers whose total accounts receivable exceeded 10% of total accounts receivable.

At December 31, 2023, the Company had four customers, whose total revenue exceeded 10% of the total consolidated revenue.

These customers accounted for 74.4 % of the total revenue.

As of December 31, 2023, the Company had three customers whose total accounts receivable exceeded 10% of the total accounts receivable.

These customers accounted for 63.3 % of the total accounts receivable as of December 31, 2023.

For fiscal year 2021, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue.

This customer accounted for 14.6 % of total revenue.

As of December 31, 2021, the Company had two customers whose total accounts receivable exceeded 10% of total accounts receivable.

At December 31, 2022, the Company had four customers whose total revenue exceeded 10% of the total consolidated revenue.

These customers accounted for 71.9 % of the total revenue.

As of December 31, 2022, the Company had two customers whose total accounts receivable exceeded 10% of the total accounts receivable.

These customers accounted for 26.1 % of the total accounts receivable as of December 31, 2022.

There is significant financial risk associated with a dependence upon a small number of customers.

The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated bad debt.

The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated credit losses.

Fair Value of Financial Instruments

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The carrying amounts of cash, restricted cash, receivables, payables, accrued liabilities, bank indebtedness and the margin loan approximate fair value due to the short-term nature of the instruments.

The Company used the settlement value for its put option liability on certain warrants and the fair values of the liability-classified derivative warrants are revalued at the end of each reporting period determined using the BSM model (Level 2) with standard valuation inputs.

The Company used the fair values of the liability-classified derivative warrants revalued at the end of each reporting period determined using the BSM option pricing model (Level 2) with standard valuation inputs.

Refer to Note 16 for additional details.

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These are fair valued using observable forward exchange rates at the measurement dates and interest rates corresponding to the maturity of the contracts (Level 2).

The fair values of the available-for-sale securities are generally based on quoted market prices, where available.

The fair values of the AFS securities are generally based on quoted market prices, where available.

These fair values are obtained primarily from third-party pricing services, which generally use Level 1 or Level 2 inputs for the determination of fair value to facilitate fair value measurements and disclosures.

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For securities not actively traded, the pricing services may use quoted market prices of comparable instruments or a variety of valuation techniques, incorporating inputs that are currently observable in the markets for similar securities.

The following table summarizes the marketable securities measured at fair value by level within the fair value hierarchy as of December 31, 2022 (in thousands):

The following table summarizes the marketable securities measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2023 (in thousands):

Level 1 Level 2 Total Fair Value

Marketable investments:

Investments in Marketable Securities:

Corporate Bonds $ 5,908 $ – $ 5,908

Treasury 609 – 609

Mortgage-Backed – 5,374 5,374

agency and government sponsored securities – 1,852 1,852

states and municipalities – 3,581 3,581

Asset-Backed – 66 66

Total $ 6,517 $ 5,433 $ 11,950

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The Company’s marketable securities are considered to be available-for-sale investments as defined under FASB ASC 320, Investments – Debt and Equity Securities .

There were no impairment charges recorded for the marketable securities during the years ended December 31, 2022 and 2021.

An allowance for credit loss was not recorded for the marketable securities as of December 31, 2023 and December 31, 2022.

Refer to Note 5 for additional details.

Financial and nonfinancial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs and include the Company’s contingent earn-out liability, goodwill, intangible assets and film and television costs.

Recent Accounting Pronouncements

Financial and nonfinancial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs and include the Company’s goodwill, intangible assets and film and television costs.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No.

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ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime credit loss estimates.

The new model, referred to as the current expected credit loss (“CECL”) model, will apply to:

The new model, referred to as the current expected credit loss (“CECL”) model, applies to:

(1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures.

This includes, but is not limited to, loans, leases, held-to-

maturity securities, loan commitments, and financial guarantees.

The CECL model does not apply to available-for-sale (“AFS”) debt securities.

This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees.

The CECL model does not apply to AFS debt securities.

For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

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Early adoption is permitted for interim and annual reporting periods.

The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements but does not expect that the adoption of this standard will have a material impact.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" (“ASU 2021-08”).

The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers,” as if it had originated the contracts.

The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

Early adoption is permitted.

The Company adopted this ASU during the second quarter of 2022 and has incorporated this guidance in its evaluation of the accounting for the acquisition of Wow.

The Company has determined that the following acquisitions completed by the Company constitute a business acquisition as defined by ASC 805, Business Combinations (“ASC 805”).

Accordingly, the assets acquired and the liabilities assumed in the transactions were recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s purchase price allocations were based on an evaluation of the appropriate fair values and represent management's best estimate based on available data at the time of acquisition and during the one year period thereafter.

Fair values were determined based on the requirements of ASC 820, Fair Measurements and Disclosures (“ASC 820”).

On January 13, 2022, the Company completed the acquisition of Ameba, pursuant to a Stock Purchase Agreement (the “SPA”) by and between the Company and Tony Havelka, a resident of the Province of Manitoba (the “Seller”), in which the Company acquired from the Seller all of the issued and outstanding equity interests of Ameba.

Concurrently, pursuant to an Asset Purchase Agreement (the “APA”) by and among the Company, the Seller and Tek Gear Inc., a corporation owned by the Seller, the Company acquired from the Seller a proprietary software platform (the “Technology”) that powers the Ameba SVOD deliveries.

The transactions contemplated by the SPA and the APA are referred to as the “Ameba Acquisition.”

Final consideration paid by the Company at closing, excluding transaction costs, consisted of $ 3.8 million in cash pursuant to the SPA, inclusive of $ 0.3 million for a net working capital adjustment (the “NWC Adjustment”) and $ 0.3 million in cash pursuant to the APA, for total consideration of $ 4.1 million, or $ 3.9 million net of cash acquired.

Transaction costs relating to the Ameba Acquisition of $ 0.1 million, including legal and accounting fees, were expensed as part of General and Administrative expense on the Company's consolidated statement of operations.

The Ameba Acquisition facilitates the Company’s expansion into SVOD with its technology and content essential to the launch of the ad-free subscription-based Kartoon Channel!

Kidaverse platform.

The acquisition provides immediate benefit recognized through the content available on the SVOD Ameba TV channel app, available for download on Amazon Fire TV, Roku, Xbox 360, Xumo, LG Smart TV, TiVo, VEWD, CINEMOOD and iOS and Android devices.

The following table summarizes the consideration paid, including the NWC Adjustment (in thousands):

SPA cash consideration at closing $ 3,500

APA cash consideration at closing 300

Net working capital adjustment 269

Total $ 4,069

The NWC Adjustment of $ 268,658 was calculated by the Company as defined by the agreement.

The adjustment was agreed upon by the acquiree and paid out during the second quarter of 2022.

The Company has completed and finalized the purchase price allocation as of December 31, 2022 and recorded the respective fair values of assets acquired and liabilities assumed on January 13, 2022 as follows (in thousands):

Accounts Receivable 239

Prepaid Expenses 25

Trade Name 24

Digital Networks 2,804

Technology 300

Accounts Payable and Accrued Expenses ( 140 )

Tax Liability ( 31 )

Total Consideration $ 4,069

The identifiable intangible assets acquired of $ 3.1 million is comprised of $ 2.8 million for the Digital Network, Ameba TV, with a remaining economic life of 18 years, $ 23,557 for Ameba’s trade name with a useful life of 3 years and $ 0.3 million for the SVOD technology with a remaining useful life of approximately 3 years.

The $ 0.7 million in goodwill arising from the acquisition consists largely of the synergies expected from the combined businesses, including the Company’s build-out of its technology for the expansion of the Kartoon Channel!

The goodwill was recorded to the Content Production & Distribution reporting unit and was not deductible for tax purposes.

With the assistance of a third-party specialist, the Company calculated an estimate of the underlying tax basis of the acquired net assets resulting in a $ 0.8 million deferred tax liability and a step-up in the fair value of goodwill.

The Company recorded the deferred tax liability and increase in fair value of goodwill during the fourth quarter of 2022.

The fair values of the acquired identifiable intangible assets as described above were determined using the following methods:

Valuation Methodology

The digital network was valued by performing a discounted cash flow analysis.

This method includes discounting the projected cash flows associated with the current digital network content, based primarily upon historical revenue and projections over its expected life and considers the operating expenses and contributory asset charges associated with servicing such network.

Projected cash flows attributable to the digital network were discounted to the present value at a rate commensurate with the perceived risk.

The useful life of the digital network is estimated based primarily upon the present value of cash flows attributable to the digital network.

The Ameba trade name was valued using the relief-from-royalty method.

This method is an income approach that estimates the portion of a company’s earnings attributable to an asset based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting annual royalty payments are tax-affected and then discounted to present value.

The useful life of the trade name is based on the estimated time it will take for the Company to rebrand the Ameba trade name and logo with the Company branded Kartoon Channel!

Kidaverse trade name.

The technology was valued at cost as the Company determined that the cost approximated the fair value.

The assumptions used in forecasting cash flows for each of the identified intangible assets included consideration of the following:

• Historical performance including sales and profitability.

• Expense estimates.

• Contributory asset charges.

• Estimated economic life of asset.

• Acquisition of new customers.

• Attrition of existing customers.

Wow Unlimited Media

On April 6, 2022, the Company completed the acquisition of Wow.

On October 26, 2021, the Company’s wholly-owned subsidiary, 1326919 B.C.

The Company purchased 100 % of the issued and outstanding shares of Wow, including Wow’s subsidiary Frederator.

The plan of arrangement and final agreement, together with the acquisition of Wow’s Mainframe Studios and its subsidiary Frederator, are referred to as the “Wow Acquisition.”

The final consideration of $ 52.7 million, excluding transaction costs, was paid by the Company at closing.

The consideration consisted of $ 38.3 million in cash, 1,105,708 shares of the Company’s common stock, including 69,126 Exchangeable Shares, with a fair value of $ 11.6 million, 240,952 options granted to employees of Wow, 196,753 of which with a fair value of $ 1.2 million, were previously vested and included in the purchase price and $ 1.6 million in severance and bonuses to executives.

Transaction costs relating to the Wow Acquisition of $ 4.5 million, including bank, legal and accounting fees, were expensed as part of General and Administrative expenses on the Company's consolidated statement of operations.

The Company will also expense the unvested replacement options, with a fair value of $ 0.3 million, as stock-based compensation expense over the remaining requisite service period specified in the agreements.

The Wow Acquisition facilitates the Company’s expansion as a global animation and children’s digital media company.

With Wow’s content, ongoing production projects and the addition of two studios that can also be leveraged for in-house production of the Company’s properties, will drive cost synergies, facilitate further expansion into the global children’s entertainment market and strengthen financial growth.

Frederator, with its owned and operated channels on YouTube, will provide a distribution platform to facilitate the global growth of Kartoon Channel!

The following table summarizes the consideration paid (in thousands):

Cash $ 38,310

Genius Common Stock Issued 10,832

Shares Issued Exchangeable for Genius Common Stock 722

Stock Option Value of Replacement Options- Pre- Combination Vested Options 1,214

Severance Payments 1,044

Total $ 52,651

Cash and cash equivalents $ 2,573

Accounts Receivable 34,237

Other Receivable 78

Prepaid Expenses and Other 1,245

Property and Equipment 1,936

ROU Assets 10,311

IP (Productions in Progress) 4,600

IP (Completed Productions) 5,684

Tradename 7,630

Customer Relationships 16,064

Networks and Platforms 803

Goodwill 21,398

Accounts Payable ( 1,547 )

Participations Payable ( 1,380 )

Bank Debt ( 1,475 )

Accrued Liabilities ( 3,825 )

Interim Production Facilities ( 16,930 )

Deferred Revenue ( 18,080 )

Lease Liabilities ( 10,614 )

Other Liabilities ( 57 )

Total Consideration

The identifiable intangible assets acquired of $ 34.8 million is comprised of $ 16.1 million for Customer Relationships, with remaining economic lives of 8 years, $ 10.3 million for IP Content including completed productions and productions in progress, that is included as part of Film and Television Costs, net on the consolidated balance sheet and will be amortized as such, Tradenames for $ 7.6 million, with an indefinite life and Networks and Platforms of $ 0.8 million, with a remaining economic life of 16 years.

The goodwill of $ 21.4 million arising from the acquisition consists largely of the synergies expected from the combined businesses, including the Company’s ability to produce its content in-house utilizing the acquired studios and expansion of the Kartoon Channel!

The goodwill was recorded to the Content Production & Distribution reporting unit and is not deductible for tax purposes.

The fair values of the acquired identifiable intangible assets as described above were determined using the following methods:

Valuation Methodology

The Networks and Platforms were valued by performing a discounted cash flow analysis, specifically the multi-period excess earnings method.

This method involves quantifying the amount of residual (or excess) cash flows generated by the current digital network content, based primarily upon historical revenue and projections over its expected life, and considers the operating expenses and contributory asset charges associated with servicing such network.

Projected cash flows attributable to the networks are discounted to present value at a rate commensurate with the perceived risk.

The significant assumptions used in this model included the customer attrition rate, acquisition rate of new customers, weighted average cost of capital, and expense estimates.

The useful life of the networks is estimated based primarily upon the present value of cash flows attributable to the digital network.

The significant assumptions used in this method included the royalty rate and weighted average cost of capital.

The Tradenames were valued using the relief-from-royalty method.

The relief-from-royalty method is one of the methods under the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting annual royalty payments are tax-affected and then discounted to present value.

Supplemental Pro Forma Information

The following supplemental unaudited pro forma information summarizes the Company’s results of operations as if the acquisitions were completed at the beginning of the periods presented (in thousands, except for share and per share data):

Year Ended Partial Period Pre-Acquisition Year Ended

Genius Brands Consolidated (inc.

WOW and Ameba Pre-Acquisition Results) Wow Pre-Acquisition Ameba Pre-Acquisition Wow Pre-Acquisition Ameba Pre-Acquisition

December 31, 2022 (1)

December 31, 2021

January 1- March 31, 2022

January 1-16, 2022 December 31, 2021 (1)

December 31, 2021

Total Revenues $ 80,404 $ 72,641 $ 18,076 $ 28 $ 64,010 $ 758

Net Loss Attributable to Genius Brands International, Inc.

$ ( 44,617 ) $ ( 123,370 ) $ 1,011 $ ( 32 ) $ 2,542 $ 380

Net Loss per Share of Common Stock (Basic and Diluted) $ ( 1.42 ) $ ( 4.15 )

Weighted Average Shares Outstanding (Basic and Diluted) 31,388,277 29,751,337

(1) The unaudited historical financial statements of Wow are not adjusted for conversion to U.S.

GAAP from International Financial Reporting Standards, as the adjustments are immaterial to the periods presented.

The Company has adopted the ASU as of January 1, 2023.

The adoption of this ASU resulted in updated disclosures within our financial statements, but did not impact the consolidated financial statements.

Refer to Note 5 for additional details.

New Accounting Standards Issued but Not Yet Adopted

In October 2023, the FASB issued ASU No.

2023-06, Disclosure Improvements .

The new guidance clarifies or improves disclosure and presentation requirements on a variety of topics in the codification.

The amendments will align the requirements in the FASB Accounting Standard Codification with the SEC’s regulations.

The amendments are effective prospectively on the date each individual amendment is effectively removed from Regulation S-X or Regulation S-K.

The Company is in the process of evaluating the impact that the adoption of this ASU will have to the consolidated financial statements and related disclosures, which is not expected to be material.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting – Improvements to Reportable Segments Disclosures .

The amendments enhance disclosures of significant segment expenses by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM), extend certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be reported under certain conditions.

The amendments are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued.

The Company is in the process of evaluating the impact that the adoption of this ASU will have to the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this Update are effective for annual periods beginning after December 15, 2024.

Variable Interest Entity

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Entertainment, LLC.

(“POW”) in which we agreed to form an entity with POW to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee.

The entity is called “Stan Lee Universe, LLC.” POW and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021.

The purpose of the acquisition was to enable the Company to assume the worldwide rights, in perpetuity, to the name, physical likeness, physical signature, live-action and animated motion picture, television, online, digital, publishing, comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations (the “Stan Lee Assets”), from which Genius Brands plans to develop and license multiple properties each year.

The Company contributed $ 2.0 million to obtain 50 % of SLU’s voting equity and POW, for the remaining 50 %, contributed the specified intangible assets associated with the Stan Lee Assets.

POW will retain certain rights in the transferred intangible assets, namely existing the rights/obligations arising from current licensing agreements.

Under ASC 805, the Company determined that the value of SLU was wholly attributable to the Stan Lee Assets and would be accounted for as an asset acquisition.

The acquisition cost of $ 2.0 million was equivalent to the value of the Stan Lee Assets contributed by POW.

Therefore, the fair value of the consideration paid by the entity of $ 2.0 million and the fair value of the 50 % noncontrolling interest approximated a total of $ 4.0 million.

Pursuant to the guidance under ASC 810, the Company concluded that SLU qualifies as a variable interest entity (“VIE”).

The Company consolidates the results of SLU as it was determined that the Company is the primary beneficiary due to having the power through the collaboration to direct the activities that most significantly impact the entity’s economic performance and the Company is required to fund over half of the economic support of the entity.

Accordingly, the Company recorded the total fair value of the Stan Lee Assets in SLU of $ 4.0 million, as an intangible asset to be amortized over the duration of 70 years, the life of the publicity rights related to Stan Lee’s name, likeness, voice, physical characteristics, etc.

During the year ended December 31, 2022, SLU generated $ 2.1 million in net income and the Company distributed $ 1.2 million to POW as their share of the non-controlling interest in SLU.

The Company's investment in SLU was $ 0.8 million, net $ 1.2 million of distributions as of December 31, 2022 and $ 2.0 million as of December 31, 2021, respectively.

There were no changes in facts and circumstances that occurred during the year ended December 31, 2022 that would result in a re-evaluation of the VIE assessment.

(“POW”) in which the Company agreed to form an entity with POW to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee.

The entity is called “Stan Lee Universe, LLC” (“SLU”).

POW and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021.

The purpose of the acquisition was to enable the Company to assume the worldwide rights, in perpetuity, to the name, physical likeness, physical signature, live-action and animated motion picture, television, online, digital, publishing, comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations (the “Stan Lee Assets”), from which the Company plans to develop and license multiple properties each year.

During the year ended December 31, 2023, SLU generated an insignificant amount of net income.

There were no contributions or distributions during the year ended December 31, 2023 and there were no changes in facts and circumstances that would result in a re-evaluation of the VIE assessment.

Investment in Equity Interest

On December 1, 2021, the Company completed a $ 6.8 million investment in YFE.

Following the initial equity investment in YFE, the Company participated in a mandatory tender offer for the remaining publicly traded shares held by YFE shareholders.

Upon the expiration of the offer on February 14, 2022, the Company purchased an additional 2,637,717 shares of YFE at 2.00 EUROS per share or $ 5.3 million EUROS ($ 6.0 million USD) in the aggregate.

On April 5, 2022, the Company exercised its subscription rights to purchase an additional 914,284 shares of YFE’s common stock at 3.00 EUROS per share, or $ 2.7 million EUROS ($ 2.9 million USD), increasing the number of YFE’s outstanding shares to 6,857,132 .

As of December 31, 2023, the Company owned 6,857,132 shares of YFE.

At the time of the initial investment in 2021, it was determined that based on the Company’s 28.69 % ownership in YFE, the Company had significant influence over the entity.

Therefore, under the equity method of accounting, the Company elected to account for the investment at fair value under the fair value option.

Under the fair value option, the investment is remeasured and recorded at fair value each reporting period, with the change recorded through earnings.

As of December 31, 2023, the fair value of the investment was determined to be $ 19.1 million recorded within noncurrent assets on the Company’s consolidated balance sheets.

The fair value as of December 31, 2023 increased by net $ 2.8 million, as compared to December 31, 2022.

The net increase is comprised of the net impact of an increase in YFE’s stock price, resulting in a gain in fair value of $ 2.3 million, and the effect of foreign currency remeasurement from EURO to USD, resulting in a gain of $ 0.5 million.

The total change in fair value is recorded within Other Income (Expense), net on the Company’s consolidated statement of operations.

As of December 31, 2023 and December 31, 2022, the Company’s ownership in YFE was 44.8 %.

Marketable Securities

The Company classifies and accounts for its marketable debt securities as available-for-sale and the securities are stated at fair value.

The Company classifies and accounts for its marketable debt securities as AFS and the securities are stated at fair value.

On January 1, 2023, the Company adopted ASU 2016-13 Measurement of Credit Losses on Financial Instruments (Topic 326) , which replaced the legacy GAAP other-than-temporary impairment (“OTTI”) model with a credit loss model.

The credit loss model applicable to AFS debt securities requires the recognition of credit losses through an allowance account but retains the concept from the OTTI model that credit losses are recognized once securities become impaired.

The adoption of the ASU did not have a material impact on the Company's financial statements.

The investments in marketable securities had an adjusted cost basis of $ 12.8 million and a market value of $ 12.0 million as of December 31, 2023.

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Treasury 646 ( 37 ) 609

Mortgage-Backed 5,980 ( 606 ) 5,374

Agency and Government Sponsored Securities 2,000 ( 148 ) 1,852

States and Municipalities 3,859 ( 278 ) 3,581

Asset-Backed 67 ( 1 ) 66

Total $ 12,838 $ ( 888 ) $ 11,950

The investments in marketable securities had an adjusted cost basis of $ 113.8 million and a market value of $ 112.5 million as of December 31, 2021.

The investments in marketable securities as of December 31, 2022 had an adjusted cost basis of $ 90.3 million and a market value of $ 83.7 million.

The balances consisted of the following securities (in thousands) :

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Asset-Backed 67 ( 1 ) 66

Commercial Paper 998 – 998

Total $ 90,321 $ ( 6,615 ) $ 83,706

The Company holds eighty-three available-for-sale securities, all of which are in an unrealized loss position as of December 31, 2022.

All of the available-for-sale securities held by the Company as of December 31, 2022, have been in an unrealized loss position for a period greater than twelve months .

As of December 31, 2021, the Company had not yet held marketable securities for greater than twelve months .

The Company reported the net unrealized losses in accumulated other comprehensive (loss) income, a component of stockholders' equity.

The decline in fair value is largely due to changes in

interest rates and other market conditions and is expected to recover as the securities approach maturity.

As the decline in fair value is attributable to interest rates and not credit quality, and the Company does not intend to sell the securities and it is not more likely than not the Company would be required to sell the securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the securities to be other-than-temporarily impaired as of December 31, 2022.

A realized loss of $ 0.2 million and $ 0.1 million was recognized in earnings during the year ended December 31, 2022 and December 31, 2021, respectively, due to prepayments of principals for certain mortgage-backed securities and an additional $ 0.2 million realized loss was recognized during the year ended December 31, 2022 from securities sold prior to their maturities.

The Company holds 10 AFS securities, all of which were in an unrealized loss position and have been in an unrealized loss position for a period greater than 12 months as of December 31, 2023.

The AFS securities held by the Company as of December 31, 2022 had also been in an unrealized loss position for a period greater than 12 months.

The Company reported the net unrealized losses in accumulated other comprehensive income (loss), a component of stockholders’ equity.

As of December 31, 2023 and December 31, 2022, an allowance for credit loss was not recognized as the issuers of the securities had not established a cause for default, various rating agencies had reaffirmed each security's investment grade status and the Company did not have the intent, nor is it required to sell its securities prior to recovery.

Realized losses of $ 4.5 million and $ 0.4 million were recognized in earnings during the years ended December 31, 2023 and 2022, respectively, primarily due to selling securities prior to maturity to prevent further market condition losses on the securities.

The contractual maturities of the Company’s marketable investments as of December 31, 2023 were as follows (in thousands):

1 unchanged sentence

Due after 1 year through 5 years 11,950

Due after 5 years through 10 years 4,471

Due after 10 years 4,193

Total $ 11,950

12 unchanged sentences

Property and Equipment, net $ 1,877 $ 2,400

During the years ended December 31, 2022 and December 31, 2021, the Company recorded depreciation expense of $ 0.4 million and $ 0.6 million, respectively.

Right of Use Leased Asset

Right of use asset consisted of the following (in thousands):

During the years ended December 31, 2023 and 2022, the Company recorded depreciation expense of $ 0.4 million for both respective periods.

The Company terminated its New Jersey office lease effective August 1, 2023.

The property and equipment that would no longer be utilized was written down to zero, resulting in a $ 0.1 million loss, recorded as Loss on Lease Termination within Other Income (Expense), net on the consolidated statement of operations in the year ended December 31, 2023.

In addition, during the first quarter of 2023, a reassessment of the Company’s long-lived assets was performed due to changes in its estimated undiscounted future cash flows.

As a result, a loss of $ 0.1 million was recorded as an Impairment of Property and Equipment within Operating Expenses on the consolidated statement of operations in the year ended December 31, 2023.

The Company did not incur any impairment charges or write-downs during the year ended December 31, 2022.

Leased Right-of-Use Assets, net

Leased right-of-use assets consisted of the following (in thousands):

As of December 31,

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Equipment Lease Assets 5,360 3,928

Right Of Use Asset, Gross 14,241 3,364

Right-of-Use Assets, Gross 14,797 14,241

Accumulated Amortization ( 5,237 ) ( 2,587 )

Foreign Currency Translation Adjustment ( 617 ) ( 810 )

Right Of Use Asset, Net $ 10,844 $ 2,785

Leased Right-of-Use Assets, net $ 8,943 $ 10,844

Refer to Note 19 for details on the Company’s lease commitments.

As of December 31, 2023, the weighted-average lease term for the Company’s operating leases was 83 months and the weighted-average discount rate was 11.1 %.

As of December 31, 2022, the weighted-average lease term for the Company's finance leases was 35 months and the weighted-average discount rate was 5.3 %.

As of December 31, 2022, the weighted-average lease term for operating leases was 93 months and the weighted-average discount rate was 10.4 %.

Operating lease costs during the years December 31, 2022 and December 31, 2021 were $ 1.4 million and $ 0.5 million, respectively, recorded within General and Administrative Expenses on the Company's consolidated statement of operations.

During the year ended December 31, 2022 the Company recorded finance lease costs of $ 1.5 million, comprised of ROU amortization of $ 1.3 million recorded within General and Administrative Expenses on the Company's consolidated statement of operations and accretion of interest expense of $ 0.1 million recorded within Interest Expense on the Company's consolidated statement of operations.

The Company did not have finance leases at December 31, 2021.

Operating lease costs during the years ended December 31, 2023 and 2022 were $ 1.6 million and $ 1.4 million, respectively, recorded within General and Administrative Expenses on the Company’s consolidated statements of operations.

On August 2, 2023, Beacon Media, signed a Termination of Lease Agreement (the “Lease Termination”), effective August 1, 2023 (the “Effective Date”), related to the office space in Lyndhurst, NJ.

The Lease Termination requires Beacon Media to pay an aggregate of $ 0.1 million in consideration of terminating the lease, payable in four equal installments, starting on the cease-use date of August 1, 2023.

If it fails to pay any installment within five days of being due, Beacon Media would be responsible for the full exposure on the lease of $ 0.6 million.

The Lease Termination included a waiver of the security deposit in the amount of $ 26,208 and an agreement to leave the furniture, fixtures and leasehold improvements with a carrying value of $ 0.1 million on the Effective Date.

The Company wrote off the ROU asset, lease liability, prepaid deposit and fixed assets on the Effective Date.

Including fees, the Company recorded a total loss on lease termination of $ 0.3 million within Other Income (Expense), net on the Company’s consolidated statement of operations during the year ended December 31, 2023.

Starting from November 1, 2023, the Company's lease for their Vancouver office underwent modifications, which included rent concessions and deferrals for rent payments.

However, these changes do not cover common area maintenance (“CAM”) costs.

The landlord abated November 1, 2023 and December 1, 2023 rent payments in the amount of CAD 0.2 million and granted deferral of January-April 1, 2024 rent payments in the amount of CAD 0.4 million.

The deferral balance is required to be repaid in 8 equal payments of CAD 0.1 million by way of adding the payment to the originally scheduled payments starting on May 1, 2024.

In addition, the lease was amended to give the landlord the right to terminate the lease at any time with no less than twelve months’ notice.

The Company accounted for the changes as a modification under ASC 842.

Per ASC 842, the Company remeasured the lease liability using a discount rate as of the effective date of modification on the basis of the remaining lease term and payments.

Based on the modified lease payment terms, the discount rate was determined to be 11.7 %.

The remeasured lease liability as of November 1, 2023 was USD 5.4 million (CAD 7.1 million).

The difference of USD 0.2 million (CAD 0.3 million) compared to the lease liability balance pre-modification was recorded as a reduction to the corresponding right-of-use asset.

The remaining lease costs of USD 8.3 million (CAD 11.0 million) will be recognized on a straight-line basis over the remaining lease term .

During the year ended December 31, 2023 the Company recorded finance lease costs of $ 2.1 million comprised of ROU amortization of $ 1.9 million and $ 0.2 million of interest accretion.

During the year ended December 31, 2022 the Company recorded finance lease costs of $ 1.5 million comprised of ROU amortization of $ 1.3 million and $ 0.1 million of interest accretion.

ROU amortization is recorded within General and Administrative Expenses and accretion of interest expense is recorded within Other Income (Expense), net on the Company’s consolidated statements of operations.

Film and Television Costs, net

During the year ended December 31, 2022, Film and Television Costs increased by $ 4.8 million, net of amortization expense, as compared to December 31, 2021.

The increase in Film and Television Costs is primarily related to assuming Wow's Film and Television Cost balance into the consolidated balance sheet of $ 6.4 million as of December 31, 2022.

The remaining decrease, as compared to the prior year, is primarily due to the production of Shaq’s Garage .

During the years ended December 31, 2022 and December 31, 2021, the Company recorded amortization expense of $ 13.0 million and $ 19.5 million, respectively.

Included in amortization expense during the year ended December 31, 2022, the Company recorded impairment charges of $ 6.8 million comprised of $ 1.0 million related to the write-off of the license rights to YFE titles and $ 5.8 million related to production costs.

During the year ended December 31, 2021, the Company recorded impairment charge of $ 18.2 million related to production costs.

The production cost impairments resulted from management’s periodic assessment of the ultimate revenues expected to be recognized on each episodic series, in conjunction with historical performance and current market conditions and determined the estimated future cash flows were not sufficient to recover the entire unamortized asset.

The following table highlights the activity in Film and Television Costs as of December 31, 2022 and 2021 (in thousands):

The following table highlights the activity in Film and Television Costs as of December 31, 2023 and December 31, 2022 (in thousands):

Film and Television Costs, net as of December 31, 2021 $ 2,940

Additions to Film and Television Costs 18,364

Disposals ( 11 )

Film Amortization Expense & Impairment Losses ( 12,996 )

Foreign Currency Translation Adjustment ( 517 )

Film and Television Costs, net as of December 31, 2022 7,780

4 unchanged sentences

Film and Television Costs, net as of December 31, 2023 $ 1,295

During the year ended December 31, 2023, the Company recorded amortization expense of $ 7.5 million, which includes impairment charges of $ 6.9 million.

The impairments were a result of inactive projects, projects not advancing to the production stage due to a lack of interest from potential partners and an overall economic downturn affecting customers in the entertainment industry.

During the year ended December 31, 2022, the Company recorded amortization expense of

$ 13.0 million, which includes impairment charges of $ 6.8 million comprised of $ 1.0 million related to the write-off of the license rights to YFE titles and $ 5.8 million related to production costs.

Intangible Assets, net and Goodwill

2 unchanged sentences

Intangible Assets, net

Weighted Average Remaining Amortization Period

As of December 31,

Weighted Average Remaining Amortization Period As of December 31,

Customer Relationships 6.5 $ 17,325 $ 17,325

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Technology – – 293

Non Compete – – 60

Other Intangible Assets (a) – – 325

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_______________________

(a) Represents the remaining unamortized logo and website intangible assets related to the merger with A Squared.

During the years ended December 31, 2022 and December 31, 2021, the Company recorded intangible asset amortization expense of $ 2.3 million and $ 0.5 million, respectively.

As of December 31, 2022, $ 7.2 million of the Company's intangible assets related to the acquired trade names from the Wow acquisition have indefinite lives and are not subject to amortization.

The Company did not have any indefinite-lived intangible assets as of December 31, 2021.

Pursuant to ASC 350-30, General Intangibles Other than Goodwill , the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events.

During the year ended December 31, 2022, as a result of our annual impairment testing, the Company recorded a non-cash intangible impairment charge of $ 4.1 million for a determined decrease in value of Beacon's Customer Relationships and Non-Compete Agreements.

As of December 31, 2021, the Company decided to discontinue the use of the trade name acquired as part of the acquisition of Beacon, resulting in a write-down of the full book value of $ 3.4 million.

Expected future intangible asset amortization as of December 31, 2022 is as follows (in thousands):

(a) Represents the logo and website intangible assets related to the merger with A Squared that has been fully amortized during the year ended December 31, 2023.

During the years ended December 31, 2023 and 2022, the Company recorded intangible asset amortization expense of $ 2.1 million and $ 2.3 million, respectively.

Pursuant to ASC 350-30, General Intangibles Other than Goodwill , the Company reviews its intangible assets periodically to determine if the value should be retired or impaired due to recent events.

During the year ended December 31, 2023, due to changes in the Company’s financial projections, the Company reassessed its definite and indefinite-lived intangible asset values to determine whether impairments existed.

As a result, the Company recorded a total impairment of $ 4.4 million as Impairment of Intangible Assets within Operating Expenses in the consolidated statement of operations.

The impairment charge consisted of a write-down of definite-lived intangible assets of $ 2.8 million, due to a decrease in an asset group’s estimated undiscounted cash flows and an impairment of the Frederator Tradename, an indefinite-lived intangible asset, of $ 1.7 million due to a decrease in its estimated present value of cash flows.

During the year ended December 31, 2022, as a result of the Company’s annual impairment testing, the Company recorded an impairment charge of $ 4.1 million related to Beacon’s Non-Compete Agreements and Customer Relationships.

Expected future amortization of intangible assets subject to amortization as of December 31, 2023 is as follows (in thousands):

Thereafter 6,836

Total $ 17,336

In 2013, the Company recognized $ 10.4 million in goodwill, as a result of the merger with A Squared.

During the first quarter of 2021, the Company recognized $ 9.7 million in goodwill, as a result of the acquisition of Beacon, which was subsequently written down to $ 4.9 million as of December 31, 2021.

As of December 31, 2022, the remaining goodwill balance from the acquisition of Beacon was fully written off due to impairment.

As a result of the Ameba Acquisition during the first quarter of 2022 and the Wow Acquisition during the second quarter of 2022, the Company recorded goodwill of $ 0.7 million and $ 21.4 million, respectively, as determined to be the amount in excess of the fair value of the assets acquired and liabilities assumed in the acquisition.

The goodwill for the Ameba and Wow Acquisition was allocated to the Content Production and Distribution reportable segment.

As Wow's functional currency is the CAD, goodwill will change each period due to currency exchange differences.

The Company has performed its annual review of goodwill and its indefinite lived intangible asset during the fourth quarter of 2022.

Goodwill on the Company’s consolidated financial statements relates to both the Content Production & Distribution reporting unit and the Media Advisory & Advertising Services reporting unit.

The Company performed a qualitative assessment of the Content Production & Distribution reporting unit and determined that an impairment was not indicated.

Due to a decrease in projected cash flows, the Company elected to initially perform a quantitative assessment on its Media Advisory & Advertising Services segment.

The fair value of the Media Advisory & Advertising Services reporting unit in accordance with the goodwill impairment test was determined using the income and market approaches.

The income approach employs the discounted cash flow method reflecting projected cash flows expected to be generated by market participants and then adjusted for time value of money factors and requires management to make significant estimates and assumptions related to forecasts of future revenues, operating margins, and discount rates.

The market approach utilizes an analysis of comparable publicly traded companies and requires management to make significant estimates and assumptions related to the forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA) and multiples that are applied to management’s forecasted revenues and EBITDA estimates.

The carrying value of the Media Advisory & Advertising Services reporting unit, which is comprised of the Beacon operations, exceeded its fair value, resulting in an impairment of goodwill of $ 4.9 million.

The following table summarizes the changes in the carrying amount of goodwill by reportable segment (in thousands):

Content Production & Distribution Media Advisory & Advertising Services Total

As of December 31, 2023, $ 5.7 million of the Company’s intangible assets related to the acquired trade names from the Wow acquisition had indefinite lives and are not subject to amortization.

The following table summarizes the changes in the carrying amount of goodwill remaining in one of its reporting units (in thousands):

Content Production & Distribution

Goodwill as of December 31, 2022 (1) $ 33,474

Acquisition of Ameba 1,422 – 1,422

Acquisition of Wow 21,398 – 21,398

Goodwill Impairment ( 33,534 )

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Goodwill as of December 31, 2023 $ –

(1) The December 31, 2022 balance is adjusted to include the correction of error as noted in Note 2 within the Restatement of Previously Issued 2022 Financial Statements and Unaudited Interim 2023 Financial Statements section.

As Wow's functional currency is the CAD, goodwill changes each period due to currency exchange differences.

During the year ended December 31, 2022, the Company recorded a goodwill impairment charge of $ 4.9 million that resulted in a remaining balance of $ 0 related to the goodwill allocated to its Media Advisory & Advertising Services reporting unit.

During the year ended December 31, 2023, the Company reassessed its remaining goodwill allocated to the Content Production and Distribution reporting unit for impairment.

As a result, the Company wrote the total goodwill balance to $ 0 and recorded an Impairment of Goodwill of $ 33.5 million within Operating Expenses in its consolidated statement of operations.

Deferred Revenue

As of December 31, 2022, and 2021, the Company had total short term and long term deferred revenue of $ 12.4 million and $ 3.9 million, respectively.

The increase in deferred revenue is partially related to assuming Wow's deferred revenue balance into the consolidated balance sheet of $ 8.7 million as of December 31, 2022.

As of December 31, 2023 and December 31, 2022, the Company had aggregate short term and long term deferred revenue of $ 6.6 million and $ 12.4 million, respectively.

The decrease in deferred revenue is primarily related to productions on various shows nearing completion of the project as of December 31, 2023, compared to the progress as of December 31, 2022.

Wow's deferred revenue balance relates to cash received from customers for productions in progress.

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The Company recognizes revenue related to these contracts when all revenue recognition criteria have been met.

Supplemental Financial Statement Information

Other Income (Expense), Net

Components of other income (expense), net, are summarized as follows (in thousands):

Year Ended December 31,

Interest Expense (a) $ ( 2,329 ) $ ( 20 )

Gain on Warrant Revaluation (b) 557 342

Loss on Foreign Exchange (c) ( 2,161 ) ( 26 )

Loss on Marketable Securities Investments (d) ( 413 ) ( 70 )

Gain (Loss) on Revaluation of Equity Investment in YFE (e) 1,392 ( 106 )

Interest Income (f) 1,015 559

Finance Lease Interest Expense (g) ( 116 ) –

Warrant Incentive Expense (h) – ( 69,139 )

Gain on Contingent Consideration Revaluation (i) 1,345 5,846

Other Income (Expense) $ 1,625 $ ( 62,594 )

(a) Interest expense during the year ended December 31, 2022 primarily consisted of $ 1.3 million of interest incurred on the margin loan collateralized by the marketable security investments and $ 0.9 million of interest incurred on production facilities loans and bank indebtedness assumed as part of the Wow Acquisition.

(b) The gain on warrant revaluation is related to the change in fair value of outstanding warrants that were determined to be derivative liabilities attached to previously issued and converted convertible notes.

(c) The loss on foreign currency exchange during the year ended December 31, 2022 primarily relates to the EURO strengthening against the USD compared to the year ended December 31, 2021.

The remeasurement of the investment in YFE’s equity securities resulted in a foreign exchange loss of $ 1.4 million and the remeasurement of cash held in a German bank account resulted in a foreign exchange loss of $ 0.5 million.

For the year ended December 31, 2021 the loss on foreign currency exchange is related to foreign currency denominated monetary transactions.

(d) The net realized loss on marketable securities reflects the loss that will not be recovered from the investments due to selling securities and issuers' prepayments of principals on certain mortgage-backed securities.

(e) The fair value revaluation of the investment in YFE, accounted for using the fair value option, as of December 31, 2022, resulted in a $ 1.4 million gain.

The gain is a result of the increase in YFE’s stock price as of December 31, 2022, as compared to December 31, 2021.

(f) Interest Income during the year ended December 31, 2022, primarily consisted of cash interest received of $ 2.0 million from the investments in marketable securities, net of premium amortization expense of $ 1.1 million.

(g) The finance lease interest expense represents the interest portion of the finance lease obligations assumed as part of the Wow Acquisition for equipment purchased under an equipment lease line.

Prior to the acquisition of Wow, the Company did not have any finance leases.

(h) The Warrant Incentive Expense was related to the fair value of new warrants issued in 2021 to certain existing warrant holders in exchange for previously issued outstanding warrants.

(i) The gain on contingent consideration revaluation is related to the change in fair value of the liability recorded for the earn-out arrangement with the sellers of the ChizComm entity acquired during 2021.

The favorable decrease in the liability was based on updated assumptions utilized to value the contingency as of each period presented.

As of December 31, 2023 and December 31, 2022, the Company’s margin loan balance was $ 0.8 million and $ 60.8 million, respectively.

During the year ended December 31, 2023, the Company borrowed an additional $ 21.2 million

from its investment margin account and repaid $ 81.2 million primarily with cash received from sales and maturities of marketable securities.

The borrowed amounts were primarily used for operational costs.

The interest rates for the borrowings fluctuate based on the Fed Funds Upper Target plus 0.60 %.

The Company incurred interest expense on the loan of $ 1.5 million and $ 1.3 million during the years ended December 31, 2023 and December 31, 2022, respectively.

Due to the call option, the margin loan is recorded as a current liability on the Company’s consolidated balance sheets.

Bank Indebtedness and Production Facilities

Upon the acquisition of Wow, the Company assumed certain credit facilities (the “Facilities”).

Upon the acquisition of Wow, the Company assumed certain credit facilities (together, the “Facilities”).

The Facilities are comprised of the following:

Revolving Demand Facility

On December 15, 2022, the Company amended the Facility.

Draws of up to $ 8.0 million CAD (previously $ 5.0 million CAD) under a revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank prime rate loans, Canadian Bankers’ Acceptances, Secured Overnight Financing Rate (“SOFR”) or letters of credit.

Canadian or US dollar bank prime borrowings bear interest at a rate equal to bank prime plus 2.00 % per annum.

For other draws under the revolving facility, the respective loans bear interest at a rate equal to Canadian Bankers’ Acceptances or SOFR plus 3.75 % per annum.

As of December 31, 2022, the Company had an outstanding balance of $ 2.4 million CAD ($ 1.7 million USD) on the revolving demand facility by way of bank prime rate loan draws, included as Bank Indebtedness within current liabilities on the Company’s consolidated balance sheet.

As of December 31, 2023 and December 31, 2022, the Company had an outstanding balance of USD 2.9 million USD (CAD 3.8 million) and USD 1.7 million (CAD 2.4 million), respectively, on the revolving demand facility by way of bank prime rate loan draws, included as Bank Indebtedness within current liabilities on the Company’s consolidated balance sheets.

Subsequent to December 31, 2023, the Company amended the revolving demand facility during March 2024.

The CAD prime borrowings and overdrafts bear interest at a rate equal to bank prime plus 2.00 % per annum.

The USD base rate borrowings bear interest at a rate equal to bank base rate plus 2.00 % per annum.

Equipment Lease Line

On December 15, 2022, the Company amended the terms of the equipment lease line under the Facility.

Under the equipment lease line, the Company may borrow up to $ 4.3 million CAD.

On March 17, 2023, the Company amended the terms of its equipment lease line.

Under the equipment lease line, the Company may borrow up to CAD 4.0 million.

Each transaction under the equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms.

The finance rates for these equipment leases range from 3.94 % - 4.49 % with remaining lease terms of 8 - 22 months.

The Company has recorded finance lease right of use assets and finance lease liabilities for the leased equipment acquired in respect of these draws.

As at December 31, 2022, the Company has drawn down a total of $ 3.3 million CAD ($ 2.4 million USD) under the equipment lease line.

These outstanding balances as of December 31, 2022, net of repayments, are included within current and noncurrent Finance Lease Liabilities on the Company’s consolidated balance sheet.

The finance rates for these equipment leases range from 3.94 % to 7.18 % with remaining lease terms of 2 - 34 months.

As of December 31, 2023 and December 31, 2022, the Company had drawn down a total of USD 1.2 million (CAD 1.6 million) and USD 2.4 million (CAD 3.3 million), respectively, under the equipment lease line.

As of December 31, 2023 and December 31, 2022, the outstanding balances, net of repayments, were included within current and noncurrent Finance Lease Liabilities on the Company’s consolidated balance sheets.

Subsequent to December 31, 2023, the Company amended the equipment lease line during March 2024.

The equipment lease line was amended to set the maximum that can be borrowed under the equipment lease line to CAD 1.6 million.

As of December 31, 2023, the Company has drawn down the maximum of CAD 1.6 million under the equipment lease line.

Treasury Risk Management Facility

Advances under the treasury risk management facility are subject to market rates as determined by the lender’s treasury department or derivatives group at the time of the drawdown request.

Advances of up to CAD 0.5 million available under the treasury risk management facility are subject to market rates as determined by the lender’s treasury department or derivatives group at the time of the drawdown request.

The maximum term for foreign exchange forward contracts and interest rate swaps is one year .

As of December 31, 2022, there were no outstanding amounts drawn under the treasury risk management facility.

As of December 31, 2022, the Company was in compliance with all covenants under the Facility.

The treasury risk management facility is payable on demand at any time.

As of December 31, 2023 and December 31, 2022, there were no outstanding amounts drawn under the treasury risk management facility.

Subsequent to December 31, 2023, an amendment was entered into that removed the treasury risk management facility.

Production Facilities

As part of the acquisition of WOW, the Company assumed production facilities for financing specific productions.

The production facilities are used for financing specific productions.

The Company’s production facilities bear interest at rates ranging from bank prime plus 1.00 % - 1.25 % per annum.

The production facilities are generally repayable on demand and are guaranteed and secured by the Company.

The production facilities are generally repayable on demand and are guaranteed and secured by the Company with no limitations for maximum potential future payments.

The security reflects substantially all of the Company's tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements.

As of December 31, 2022, the Company had an outstanding balance of $ 24.8 million CAD ($ 18.3 million USD), including $ 1.5 million CAD of interest ($ 1.1 million USD), recorded as Production Facilities, net within current liabilities on the Company’s consolidated balance sheet.

As of December 31, 2023 and December 31, 2022, the Company had an outstanding balance of USD 15.3 million (CAD 20.3 million), including USD 1.4 million (CAD 1.9 million) of interest and USD 18.3 million (CAD 24.8 million), including USD 1.1 million (CAD 1.5 million) of interest, respectively, recorded as Production Facilities, net within current liabilities on the Company’s consolidated balance sheets.

Equipment Lease Facility

During the fourth quarter ended December 31, 2022, a subsidiary of the Company entered into an equipment lease agreement with a Canadian bank, separate from the Facility's equipment lease line.

This additional equipment lease facility allows the Company to finance equipment purchases of up to $ 1.4 million CAD in total.

Separate from the equipment lease line described above, the Company entered into an equipment lease agreement with a Canadian bank.

This additional equipment lease facility allows the Company to finance equipment purchases of up to CAD 1.4 million in total.

Each equipment lease is for a term of three years and will have specific financing terms such as finance amount and the bank’s lease base rate.

The Company has recorded finance lease right of use assets and finance lease liabilities for the leased equipment acquired in respect of these draws.

As at December 31, 2022, the Company has drawn a total of $ 0.7 million CAD ($ 0.5 million USD) under the equipment lease facility.

These outstanding balances as of December 31, 2022, net of repayments, are included within current and noncurrent Finance Lease Liabilities on the Company’s consolidated balance sheet.

The interest rate for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 0.65 % with interest only payable monthly.

The Company incurred interest expense on the loan of $ 1.3 million during the year ended December 31, 2022.

The amount of interest incurred on the margin loan during the year ended December 31, 2021 was insignificant.

The investment margin account borrowings do not mature but are payable on demand as the custodian can issue a margin call at any time, therefore the margin loan is recorded as a current liability on the Company’s consolidated balance sheets.

As of December 31, 2022 and December 31, 2021, the Company's margin loan balance was $ 60.8 million and $ 6.4 million, respectively.

As of December 31, 2023 and December 31, 2022, the Company had drawn USD 0.8 million (CAD 1.1 million) and USD 0.5 million (CAD 0.7 million), respectively, under the equipment lease facility.

As of December 31, 2023 and December 31, 2022, the outstanding balances, net of repayments, were included within current and noncurrent Finance Lease Liabilities, net on the Company’s consolidated balance sheets.

Loan Covenants, Violations and Waiver

The Company was in technical violation of two financial covenants requiring a minimum fixed charge ratio and a maximum senior funded debt to EBITDA ratio as of December 31, 2023.

The Company has continued to make its regular principal and interest payments in a timely basis since the effective borrowing date.

The revolving demand facility and the treasury risk management facility can be called at any time by the lender as per the original terms of the facilities.

The risk of the lender demanding repayment can be deemed greater due to the breach of covenants.

Subsequent to December 31, 2023, an amendment was entered into that introduced revised financial covenants that are effective as of March 15, 2024.

As of December 31, 2022, the Company met all required financial and non-financial covenants.

Stockholders’ Equity

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Eastern time.

At the effective time, every 10 issued and outstanding shares of the Company's common stock were converted into 1 share of common stock.

Any fractional shares of common stock resulting from the reverse stock split were rounded up to the nearest whole post-split share and no shareholders received cash in lieu of fractional shares.

At the effective time, every 10 issued and outstanding shares of the Company’s common stock were converted into one share of common stock.

Any fractional shares of common stock resulting from the reverse stock split were rounded up to the nearest whole post-split share and no stockholders received cash in lieu of fractional shares.

The par value of each share of common stock remained unchanged.

The reverse stock split proportionately reduced the number of shares of authorized common stock from 400,000,000 to 40,000,000 shares.

The reverse stock split also applied to common stock issuable upon the exercise of the Company's outstanding warrants and stock options.

The reverse stock split also applied to common stock issuable upon the exercise of the Company’s then outstanding warrants and stock options.

The reverse stock split did not affect the authorized preferred stock of 10,000,000 shares.

Unless noted, all references to shares of common stock and per share amounts contained in this Annual Report on Form 10-K have been retroactively adjusted to reflect a 1-for-10 reverse stock split.

As of December 31, 2023, the total number of authorized shares of common stock was 190,000,000 .

As of December 31, 2023 and December 31, 2022, there were 35,247,744 and 31,918,552 shares of common stock outstanding, respectively.

On February 18, 2022, the Company issued 35,000 shares of the Company’s common stock valued at $ 0.3 million for consulting services.

On February 24, 2022, the Company issued 3,620 shares of the Company’s common stock valued at $ 0.1 million which were held in escrow as part of the ChizComm acquisition.

On April 7, 2022, the Company issued 1,036,582 shares of the Company’s common stock valued at $ 10.8 million related to the Wow Acquisition, as part of the purchase price.

Also included as part of the Wow Acquisition, the Company has issued 69,126 shares, valued at $ 0.7 million, which will be exchanged at a future redemption date upon tender of ExchangeCo (as defined below) shares as specified in the agreement.

See additional information on the ExchangeCo shares below under “Preferred Stock.”

On May 31, 2022, the Company issued 73,667 shares of the Company’s common stock valued at $ 0.4 million to a nonemployee for productions services.

During the year ended December 31, 2023, the Company issued 481,850 shares of common stock for services.

Included in the issued shares were 400,000 shares of common stock valued at $ 1.0 million, or $ 2.47 per share, issued to the Company's lawyers and recorded as a prepaid retainer fee within Prepaid Expenses and Other Assets on the consolidated balance sheet.

The prepaid fee is reduced as the Company incurs lawyer fees.

As of December 31, 2023, the balance in the prepaid retainer fee account has been depleted.

Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized with a par value of $ 0.001 per share.

The Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by our

stockholders, to issue from time-to-time shares of preferred stock in one or more series.

Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our Board of Directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

In connection with the Company’s acquisition of Wow, certain eligible Canadian shareholders, noteholders and optionholders of Wow elected to receive the Exchangeable Shares in the capital of the Wow Exchange Co.

The board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time-to-time shares of preferred stock in one or more series.

Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

In connection with the Company’s acquisition of Wow, certain eligible Canadian stockholders, noteholders and optionholders of Wow elected to receive the Exchangeable Shares in the capital of the Wow Exchange Co.

(“ExchangeCo”) instead of shares of the Company’s common stock to which they were otherwise entitled.

The shares of ExchangeCo are exchangeable into shares of the Company’s common stock in accordance with their terms.

Holders of the ExchangeCo shares are entitled to defined voting rights (the “Voting Rights”) in the Company pursuant to a voting and exchange trust agreement (the “Voting Agreement”) dated April 6, 2022 between the Company, ExchangeCo, 1329258 B.C.

and Computershare Trust Company of Canada (the “Voting Trustee”).

The Voting Trustee holds a single share of Series B Preferred Stock in the capital of the Company (the “Special Voting Share”), which grants the Voting Trustee that number of votes at the meetings of the Company’s shareholders as is equal to the number of shares of the Company’s common stock that at such time have not been delivered pursuant to the tender of ExchangeCo shares.

The Voting Trustee holds a single share of Series B Preferred Stock in the capital of the Company (the “Special Voting Share”), which grants the Voting Trustee that number of votes at the meetings of the Company’s stockholders as is equal to the number of shares of the Company’s common stock that at such time have not been delivered pursuant to the tender of ExchangeCo shares.

The Voting Trustee is required to exercise each vote attached to the Special Voting Share only as directed by the relevant holder of the underlying Company shares of common stock and, in the absence of any instructions, will not exercise voting rights with respect to the applicable shares.

Thus, each one-thousandth of a share of Series C Preferred Stock would entitle the holder thereof to 1,000 votes.

The Series C Preferred Stock would not be entitled to vote on any other matter, except to the extent required under Chapter 78 of the Nevada Revised Statues.

The Company held a special meeting of stockholders on November 1, 2023 (the “Special Meeting”), at which both Proposals were approved by the stockholders.

As of December 31, 2023 and December 31, 2022, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of December 31, 2023 and December 31, 2022, there was 1 share of Series B Preferred Stock outstanding.

As of December 31, 2023 and December 31, 2022, there were 0 shares of Series C Preferred Stock outstanding.

Treasury Stock

During the year ended December 31, 2022, 699 shares of common stock were withheld to cover taxes owed by certain employees, all of which were included as treasury stock outstanding and recorded at cost within Treasury Stock on the consolidated balance sheet.

In addition, the Company agreed to settle the lawsuit, Harold Chizick and Jennifer Chizick v.

Genius Brands International, Inc., ChizComm Ltd, pursuant to a settlement agreement (the “Settlement Agreement”) dated October 6, 2022 (the “Settlement Date”).

Pursuant to the Settlement Agreement, the Company agreed to purchase 41,934 shares of its common stock (the “Settlement Shares”) held by the Chizicks as of the Settlement Date.

The Settlement Shares were purchased at the market price of $ 6.80 per share, plus a premium of $ 13.10 per share, for a total cost of $ 0.8 million.

As of December 31, 2022, the shares were repurchased by the Company and the market based cost on the Settlement Date of $ 0.3 million was recorded within Treasury Stock on the consolidated balance sheet and the amount in excess of market of $ 0.5 million was recorded as a legal expense within General and Administrative expenses on the Company’s consolidated statement of operations.

During the years ended December 31, 2023 and December 31, 2022, 32,840 and 699 shares of common stock with a cost of $ 48,845 and $ 4,807 , respectively, were withheld to cover taxes owed by certain employees, all of which were included as treasury stock outstanding and recorded at cost within Treasury Stock on the consolidated balance sheets.

In addition, during 2022, the Company settled a lawsuit by agreeing to purchase 41,934 shares of its common stock held by the other party.

The shares were purchased at the market price of $ 6.80 per share, plus a premium of $ 13.10 per share, for a total cost of $ 0.8 million.

The market based cost of $ 0.3 million was recorded within Treasury Stock on the consolidated balance sheet as of December 31, 2022 and the cost in excess of market of $ 0.5 million was recorded as a legal expense within General and Administrative expenses on the Company’s consolidated statement of operations.

Stock Options

On September 18, 2015, the Company adopted the Genius Brands International, Inc.

2015 Incentive Plan (the “2015 Plan”).

The total number of shares that can be issued under the 2015 Plan is 3,000,000 shares.

On September 1, 2020, the Company adopted the Genius Brands International, Inc.

2020 Incentive Plan (the “2020 Plan”).

On August 4, 2020, the Board of Directors voted to adopt the 2020 Plan.

The shares available for issuance under the 2020 Plan were approved by stockholders on August 27, 2020.

The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate of 216,767 shares of common stock, which does not include shares that the Company may issue related to acquisitions.

During the year ended December 31, 2022, the Company granted options to purchase 201,029 shares of common stock to employees with a fair market value of $ 1.3 million.

The options vest evenly over one to three years and expire five to ten years from grant date.

In addition, as part of the Wow Acquisition, the Company granted replacement options to purchase 173,310 shares of the Company’s common stock to Wow employees who would continue to provide services to the Company.

67,642 options to purchase common stock were also granted to certain departing Wow shareholders to replace their previously vested Wow options.

These options were cancelled after 30 days of the grant date if not exercised.

The fair market value of $ 1.5 million was determined utilizing assumptions as of the replacement date of April 6, 2022 and were valued using the

BSM option pricing model.

The number of shares granted was determined by using an exchange ratio calculated by a third party based on the intrinsic value of the Wow common stock purchased as part of the acquisition and the value of the Company’s common stock as of the agreement date.

The vesting terms of the replacement options remained the same as the Wow options for which they were exchanged.

All shares that replaced previously vested Wow shares were included as part of the purchase price based on the calculated fair value on the acquisition date of $ 1.2 million for 196,753 shares.

The remaining options to vest with a fair value of $ 0.3 million will be expensed over the remaining requisite period.

The options expire within three years from the replacement option grant date or the original Wow option, whichever is greater.

The fair value of the options granted during the years ended December 31, 2022 and 2021 were calculated using the BSM option pricing model based on the following assumptions:

December 31, 2022 December 31, 2021

On September 1, 2020, the Company adopted the Kartoon Studios, Inc.

2020 Incentive Plan (the “2020 Plan”) as voted by the Board of Directors.

The Board of Directors approved the maximum number of shares available for issuance up to an aggregate of 3,000,000 shares of common stock, which does not include shares that the Company may issue related to acquisitions.

The 2020 Plan replaced the previously adopted 2015 Incentive Plan (the “2015 Plan”) that had a total number of authorized shares of 216,767 , however any remaining outstanding shares granted under the 2015 Plan remain to be governed under such plan.

As of December 31, 2023, 57,800 stock options granted under the 2015 Plan remain outstanding.

All expired or terminated shares granted under the 2015 Plan, that have not been vested or exercised, reverts to and again becomes available for issuance under the 2020 Plan.

During the years ended December 31, 2023 and December 31, 2022, the Company granted options to purchase 25,000 and 441,981 shares of common stock with weighted-average grant-date fair market values of $ 9,007 and $ 259,235 , respectively.

The fair value of the options granted during the years ended December 31, 2023 and December 31, 2022 were calculated using the BSM option pricing model based on the following assumptions:

Year Ended December 31,

Exercise Price $ 1.43 $ 5.10 - $ 9.00

$ 12.00 - 30.60

Dividend Yield – % – %

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Risk-free interest rate 3.90 % 0.41 % - 3.75 %

0.41 % - 1.26 %

Expected life of options 3.0 - 5.0 years

The following table summarizes the stock option activity during the years ended December 31, 2022 and December 31, 2021:

Expected life of options 5.0 years 3.0 - 5.0 years

The following table summarizes the stock option activity during the years ended December 31, 2023 and 2022:

Number of Shares Weighted- Average Remaining Contractual

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Vested and exercisable December 31, 2023 1,016,381 5.83 $ 16.30

During the years ended December 31, 2022 and December 31, 2021, the Company recognized $ 1.7 million and $ 3.7 million, respectively in share-based compensation expense related to stock options.

The unrecognized share-based compensation expense as of December 31, 2022 was $ 1.3 million and will be recognized over a weighted average remaining contractual life of 6.49 years.

The outstanding shares as of December 31, 2022 have an aggregated intrinsic value of $ 0 .

The weighted average fair values per option granted for the year ended December 31, 2022 was determined to be $ 6.45 per share.

During the year ended December 31, 2023, upon termination of certain employees, the Company accelerated the vesting of any unvested options held by the employees pursuant to their employment agreements.

This resulted in 98,850 options becoming immediately vested on the separation date and $ 0.2 million in expense recognized by the Company.

During the years ended December 31, 2023 and 2022, the Company recognized $ 1.2 million and $ 1.7 million, respectively, in share-based compensation expense related to stock options included in General & Administrative Expense on the Company’s consolidated statements of operations.

The unrecognized share-based compensation expense as of December 31, 2023 was $ 0.2 million which will be recognized through the second quarter of 2025 assuming the underlying grants are not cancelled or forfeited.

The outstanding shares as of December 31, 2023 had an aggregated intrinsic value of zero .

Restricted Stock Units

During the year ended December 31, 2022, the Company granted 108,667 fully vested RSUs to nonemployees for consulting services with a fair market value of $ 0.8 million and 30,000 RSUs to a nonemployee with a fair market value of $ 0.3 million that vest over 1.5 years.

The Company granted 50,000 RSUs to an executive employee with a fair market value of $ 0.4 million that vest evenly over 3 years.

The RSUs expire five years from date of grant.

Per terms of the restricted stock agreements, per option of the employee, the Company may pay the employee’s related taxes associated with the employee’s vested and issued stock by issuing shares net of taxes to the employee and decreasing the freely tradable shares of the Company.

The value of the shares netted for employee taxes represents treasury stock repurchased.

An aggregate of 593,358 shares of common stock were issued as a result of vested RSUs, of which, 699 shares of common stock were withheld to pay employee taxes upon such vesting.

The Company recorded the cost of the withheld shares of $ 2,553 within Treasury Stock on the consolidated balance sheet as of December 31, 2022.

The following table summarizes the Company’s RSU activity during the years ended December 31, 2022 and December 31, 2021:

Restricted Stock Unites Weighted-

Average Remaining Contractual Life Weighted-

RSUs are granted under the Company’s 2020 Plan.

During the year ended December 31, 2023, the Company granted 148,937 fully vested RSUs to the Company’s board members and consultants, with a fair market value of $ 0.3 million and 40,000 shares of RSUs to employees with a fair value of $ 57,200 that vest evenly over three years .

An aggregate of 418,648 shares of common stock were issued during the year ended December 31, 2023 as a result of vested RSUs held by employees.

The following table summarizes the Company’s RSU activity during the years ended December 31, 2023 and 2022:

Restricted Stock Units Weighted-

Average Grant Date Fair Value per Share

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Unvested at December 31, 2023 982,625 $ 13.42

During the years ended December 31, 2022 and December 31, 2021, the Company recognized $ 9.2 million and $ 12.8 million, respectively in share-based compensation expense related to RSU awards.

The unvested share-based compensation as of December 31, 2022 is $ 1.7 million which will be recognized through the second quarter of 2025 assuming the underlying grants are not cancelled or forfeited.

During the year ended December 31, 2023, upon termination of certain employees, the Company accelerated the vesting of any unvested shares held by such employees pursuant to their employment agreements.

This resulted in 60,910 shares becoming immediately vested and issued on the separation dates and $ 0.2 million in expense recognized by the Company.

During the years ended December 31, 2023 and 2022, the Company recognized $ 1.5 million and $ 9.2 million, respectively, in share-based compensation expense related to RSU awards included in General & Administrative Expense on the Company’s consolidated statements of operations.

The unvested share-based compensation as of December 31, 2023 was $ 0.4 million which will be recognized through the second quarter of 2025 assuming the underlying grants are not cancelled or forfeited.

The total fair value of shares vested during the year ended December 31, 2023 was $ 2.9 million.

The following table summarizes the changes in the Company's outstanding warrants during the years ended December 31, 2022 and December 31, 2021:

The following table summarizes the activity in the Company’s outstanding warrants during the years ended December 31, 2023 and 2022:

Warrants Outstanding Number of

Shares Exercise Prices

Per Share Weighted Average Remaining

Shares Weighted Average Remaining

Contractual Life Weighted Average Exercise Price Per

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Balance at December 31, 2022 4,433,593 3.37 $ 22.50

Granted 4,784,909 4.84 $ 2.50

Exercised ( 2,311,550 ) 2.59 $ 23.70

Expired ( 4,000 ) – $ –

Forfeitures ( 50,000 ) – $ –

Balance at December 31, 2023 6,852,952 4.16 $ 8.19

Exercisable December 31, 2023 6,852,952 4.16 $ 8.19

Exercisable December 31, 2022 4,433,593 4.77 $ 22.50

The warrants to purchase shares of the Company’s common stock outstanding as of December 31, 2022 and December 31, 2021 had a total value of $ 73.3 million and $ 73.8 million, respectively.

As of December 31, 2022, 89,286 liability classified derivative warrants to purchase shares of the Company’s common stock remained outstanding and are revalued each reporting period.

As of December 31, 2022, the warrants were revalued at $ 0.3 million, resulting in a decrease of $ 0.6 million in liability as compared to December 31, 2021.

The change in value is recorded within net other income (expense) on the consolidated statements of operations.

The fair value of the outstanding derivative warrants was determined by using the Black-Scholes option pricing model ("BSM") based on the following assumptions:

As of December 31, 2023, 89,286 derivative warrants classified as a liability as issued with convertible notes in 2020 to purchase shares of the Company’s common stock remained outstanding and are revalued each reporting period.

of December 31, 2023, the warrants were revalued at approximately $ 0.1 million, resulting in a decrease of $ 0.2 million in liability as compared to December 31, 2022.

The change in value was recorded as a Gain on Revaluation of Warrants within Other Income (Expense), net on the consolidated statements of operations and within the Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities on the consolidated statements of cash flows.

The fair value of the outstanding derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of December 31, 2023:

December 31, 2023

Market Price $ 1.39

Exercise Price $ 2.10

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Risk-free Interest Rate 4.68 %

Expected life of options 2.2 years

Of the total outstanding warrants, two shareholders were each issued 50,000 warrants, for a total of 100,000 warrants, to purchase the Company's common stock on October 15, 2020.

The warrant agreement included a right for each holder to put their warrants to the Company for a fixed rate of $ 250,000 in cash commencing on the 2nd anniversary of the issue date.

The put option was exercisable commencing on October 15, 2022 and anytime thereafter, prior to the ten years expiration term.

On October 10, 2022, the Company received a notification of intent from one holder to exercise the put option for their 50,000 warrants in return for $ 250,000 in cash on the commencement date.

The Company paid the balance on October 10, 2022.

The remaining 50,000 warrants recorded as equity-classified warrants prior to the two-year commencement date of the option to exercise for cash, were reclassified as a current liability on the commencement date.

At each reporting period, the Company will record the greater of the cash payable upon the exercise of the put option and the fair value of the warrants as of the reporting date.

The Company revalued the remaining 50,000 warrants at $ 181,341 as of December 31, 2022 using the BSM model.

As the cash payable for the exercise of the put option is greater than the fair value of the warrant, the Company recorded $ 250,000 within Warrant Liability on the Company's consolidated balance sheet as of December 31, 2022.

The significant components of income tax expense (benefit) are as follows (in thousands):

As of December 31,

Expected Life of Warrants 1.2 years

On February 16, 2023, the Company received a notification of exercise from the holder of the remaining 50,000 warrants with a put option.

The put option was exercised for a fixed rate of $ 250,000 .

Warrant Exchange

On June 26, 2023, the Company entered into warrant exercise inducement offer letters (the “Letter Agreements”) with certain holders of the warrants issued by the Company in January 2021 that had an exercise price of $ 23.70 per share and were exercisable for an aggregate of 2,311,550 shares of the Company’s common stock (the “2021 Warrants”).

Pursuant to the Letter Agreements, the exercising holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the holders would exercise all of their 2021 Warrants for shares of the Company’s common stock at a reduced exercise price of $ 2.50 per share of common stock in exchange for the issuance of new unregistered warrants (the “Exchange Warrants”) to purchase up to an aggregate of 4,623,100 shares of common stock, equal to 200 % of the number of common stock underlying the 2021 Warrants.

Upon issuance of the Exchange Warrants, the Company did not have a sufficient number of underlying common stock that would be required to deliver based on its existing outstanding shares and commitments and the maximum number of shares that would be required to be delivered upon exercise of the Exchange Warrants.

The Company held a special meeting of stockholders on November 1, 2023, at which, among other things, a proposal to amend the Company’s Articles of Incorporation to increase the authorized shares of common stock from 40,000,000 shares to 190,000,000 shares with a corresponding increase in the total number of authorized shares of capital stock of the Company from 50,000,000 shares to 200,000,000 shares (the “Share Increase Amendment”) was approved by the stockholders.

Pursuant to the Letter Agreements, the Company filed a registration statement on Form S-3 covering the resale of the shares of common stock issuable upon the exercise of the 2021 Warrants on July 26, 2023.

The Exchange Warrants have an exercise price of $ 2.50 per share and a term of exercise of five years from November 1, 2023 (i.e., the date on which the Share Increase Amendment was approved by the stockholders).

The Company received approximately $ 5.8 million in gross proceeds recorded as an increase to Additional Paid-in Capital.

The Special Equities Group, a division of Dawson James Securities, Inc.

(“SEG”), acted as warrant solicitation agent and received a cash fee of $ 0.4 million, equal to 7.0 % of the total gross proceeds, and warrants with a value of $ 0.4 million on the issuance date to purchase up to 161,809 of the Company’s common stock at $ 2.50 per share (the “SEG Warrants”).

In addition, through issuance of the Company’s common stock, the Company paid lawyer fees of $ 0.1 million for costs directly attributable to the warrant re-pricing and exchange.

The total issuance costs of $ 0.5 million were netted against the proceeds received and recorded as a reduction to Additional Paid-in Capital on the Company's consolidated balance sheet.

As the 2021 Warrants were repriced prior to exercising, the Company utilized ASC 815 to account for the modification.

As per ASC 815, an entity shall treat a modification of the terms or conditions or an exchange of a freestanding equity classified written call option as an exchange of the original instrument for a new instrument.

The effect of a modification or an exchange shall be measured as the excess, if any, of the fair value of the modified or exchanged

instrument over the fair value of that instrument immediately before it is modified or exchanged (the “incremental expense”).

The Company calculated the fair value of the 2021 Warrants exercised immediately before the repricing using the BSM option pricing model.

The calculation used the original exercise price of $ 23.70 per share and the BSM assumptions as of June 26, 2023 to calculate the fair value immediately before the repricing and calculated the fair value of the 2021 Warrants exercised utilizing the modified exercise price of $ 2.50 per share and the same BSM assumptions as of June 26, 2023.

The resulting increase in fair value of $ 3.5 million, was considered a deemed dividend and reflected within Additional Paid-in Capital on the consolidated balance sheet as of December 31, 2023.

The fair value of the aggregate total of 4,784,909 Exchange Warrants and the SEG Warrants (collectively, the “Warrants”) on the issuance date of June 26, 2023 was determined to be $ 13.1 million, or $ 2.74 per share, as calculated using the BSM option pricing model based on the following assumptions:

June 26, 2023

Market Price $ 3.30

Exercise Price $ 2.50

Dividend Yield – %

Volatility 110 %

Risk-free interest rate 3.96 %

Expected Life of Warrants 5.0 years

The fair value of the Exchange Warrants of $ 12.7 million was recorded as a Warrant Expense within Other Income (Expense), net on the consolidated statement of operations.

The fair value of the SEG Warrants of $ 0.4 million was recorded as a reduction to Additional Paid-in Capital on the consolidated balance sheet.

At the time of grant, when taking into consideration the Company’s then existing outstanding common stock and future commitments to issue common stock, including the newly granted Warrants, the Company did not have a sufficient number of authorized and unissued shares required to net share or physically settle the equity instruments without stockholder approval to increase the authorized shares.

Therefore, per ASC 815, the Company classified the Warrants as a liability and revalued the warrants at each reporting period with the change in fair value recorded as a Gain on Warrant Revaluation within Other Income (Expense), net.

As noted above, the Company held a special meeting of stockholders on November 1, 2023, at which, among other things, the Share Increase Amendment was approved by the stockholders.

Consequently, the Company had a sufficient number of authorized and unissued shares required to settle all outstanding equity instruments, including the Warrants.

Per ASC 815, as a result of events during the period, the classification of an instrument shall be reclassified as of the date of the event that caused the reclassification by revaluing the instrument immediately prior to reclassification and any gains or losses should be recognized.

The fair value of the Warrants was determined to be $ 3.0 million, using the BSM option pricing model based on the following assumptions on October 31, 2023:

October 31, 2023

Market Price $ 0.99

Exercise Price $ 2.50

Dividend Yield – %

Volatility 98 %

Risk-free interest rate 4.82 %

Expected Life of Warrants 5.0 years

The decrease in value of $ 1.4 million was recorded as a Gain on Revaluation of Warrant within Other Income (Expense), net on the consolidated statement of operations and a decrease in liability.

The remaining liability of $ 3.0 million was then reclassed from Warrant Liability to Additional Paid-in-Capital within stockholders’ equity on the consolidated balance sheet.

Supplemental Financial Statement Information

Other Income (Expense), net

Components of Other Income (Expense), net, are summarized as follows (in thousands):

Year Ended December 31,

Interest Expense (a) $ ( 3,126 ) $ ( 2,329 )

Warrant Expense (b) ( 12,664 ) –

Gain on Revaluation of Warrants (c) 10,373 557

Gain on Revaluation of Equity Investment in YFE (d) 2,314 1,392

Realized Loss on Marketable Securities Investments (e) ( 4,496 ) ( 413 )

Gain (Loss) on Foreign Exchange (f) 641 ( 2,161 )

Interest Income (g) 622 1,015

Loss on Early Lease Termination (h) ( 258 ) –

Finance Lease Interest Expense (i) ( 189 ) ( 116 )

Gain on Contingent Consideration Revaluation (j) – 1,345

Other (k) 978 6

Other Income (Expense), net $ ( 2,679 ) $ 1,625

(a) Interest Expense during the year ended December 31, 2023 primarily consisted of $ 1.5 million of interest incurred on the margin loan and $ 1.5 million of interest incurred on production facilities loans and bank indebtedness.

(b) The Warrant Expense is related to the $ 12.7 million fair value of Exchange Warrants that were issued during the year ended December 31, 2023 to certain existing warrant holders in exchange for previously issued outstanding warrants.

(c) The Gain on Revaluation of Warrants during the year ended December 31, 2023 is primarily related to the changes in fair value of the Exchange Warrants of $ 10.1 million recorded prior to the warrants being reclassified to stockholder’s equity.

The decrease in fair value was due to decreases in market price.

(d) As accounted for using the fair value option, the Gain on Revaluation of Equity Investment in YFE is a result of the increases or decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period.

This excludes the impact of foreign currency recorded separately.

(e) The Realized Loss on Marketable Securities Investments reflects the loss that will not be recovered from the investments due to selling securities and issuers' prepayments of principals on certain mortgage-backed securities.

(f) The Gain (Loss) on Foreign Exchange during the year ended December 31, 2023 primarily related to the revaluation of the YFE investment, resulting in a gain of $ 0.5 million due to the EURO weakening against the USD as compared to the prior reporting period when a loss of $ 1.4 million was recognized.

(g) Interest Income during the year ended December 31, 2023 primarily consisted of interest income of $ 0.5 million, net of premium amortization expense, recorded for the investments in marketable securities, respectively.

The Loss on Early Lease Termination is due to early termination of the Lyndhurst, NJ office lease, effective August 1, 2023.

The loss includes fees of $ 0.2 million and the write-down of assets and liabilities resulting in a net $ 0.1 million loss.

The Finance Lease Interest Expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line.

(j) The Gain on Contingent Consideration Revaluation recorded during the year ended December 31, 2022 is related to the write-off of the contingent earn-out liability related to the earn-out arrangement with the sellers of the Beacon entities acquired during 2021 due to cancellation of the arrangement.

(k) The Company wrote-off a liability in the amount of $ 0.9 million that had legally expired during the fourth quarter of 2023 under the statute of limitations on debt collection, resulting in an increase in other income at December 31, 2023.

Supplemental Pro Forma Information

On January 13, 2022, the Company completed the acquisition of Ameba, at which Ameba’s financial information was consolidated into the Company’s financials.

On April 6, 2022, the Company completed the acquisition of Wow.

Wow’s financial information was consolidated into the Company’s financials starting April 1, 2022.

The following unaudited supplemental pro forma information summarizes the Company’s results of operations as if the Company completed the Wow and Ameba acquisitions at the beginning of the annual period 2022, when acquired (in thousands, except for share and per share data):

Supplemental pro forma information is as follows:

Year Ended December 31,

Total Revenues $ 80,404

Net Loss Attributable to Kartoon Studios, Inc.

Net Loss per Share (Basic and Diluted) $ ( 1.42 )

Weighted Average Shares Outstanding (Basic and Diluted) 31,388,277

The unaudited pro forma combined financial information is presented for informational purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that the Company would have reported had the acquisitions been completed as of the date and for the periods presented and should not be taken as representative of the Company’s consolidated results of operations or financial condition following the acquisition.

In addition, the unaudited pro forma combined financial information is not intended to project the future financial position or results of operations of the combined company.

The unaudited pro forma financial information was prepared using the acquisition method of accounting under existing US GAAP.

For financial reporting purposes, Loss Before Income Tax Benefit (Expense) includes the following components (in thousands):

Year Ended December 31,

United States $ ( 45,517 ) $ ( 42,254 )

Foreign ( 32,658 ) ( 2,170 )

Loss Before Income Tax Benefit (Expense) $ ( 78,175 ) $ ( 44,424 )

The significant components of Income Tax Benefit (Expense) are as follows (in thousands):

Year Ended December 31,

Federal $ – $ –

Foreign – ( 150 )

Federal 152 –

Foreign 705 45

Income Tax Expense:

Income Tax Benefit (Expense) $ 973 $ ( 105 )

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences.

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Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components (in thousands):

Deferred Tax Liability, net consists of the following components (in thousands):

As of December 31,

Deferred Tax Assets:

NOL Carryover $ 40,870 $ 22,452

Net Operating Loss Carryover $ 48,857 $ 40,870

Lease Liability 2,632 3,140

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Other 2,519 1,924

Subtotal 50,293 26,260

Total Gross Deferred Tax Assets 56,159 50,293

Valuation Allowance ( 49,963 ) ( 42,938 )

Deferred Tax Assets, net $ 6,196 $ 7,355

Deferred Tax Liabilities:

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Intangible Assets (1) ( 5,168 ) ( 6,778 )

Net Deferred Tax Liability $ ( 705 ) $ –

Total Gross Deferred Tax Liabilities $ ( 7,595 ) $ ( 9,727 )

Deferred Tax Liability, net $ ( 1,399 ) $ ( 2,372 )

The income tax provision differs from the amount of income tax determined by applying the U.S.

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Year Ended December 31,

Income Tax Expense Computed at the Statutory Federal Rate $ ( 9,553 ) $ ( 26,521 )

Income Tax Benefit Computed at the Statutory Federal Rate $ 16,396 $ 9,553

State Income Taxes, Net of Federal Tax Effect 1,630 1,883

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Valuation Allowance ( 8,729 ) ( 8,096 )

Income Tax Expense $ 105 $ –

Income Tax Benefit (Expense) $ 973 $ ( 105 )

At December 31, 2023, the Company had Federal, state, and foreign net operating loss carry forwards of approximately $ 125.8 million, $ 126.2 million, and $ 50.5 million, respectively, that may be offset against future taxable income and will begin to expire in 2027, if not utilized.

No tax benefit has been reported in the December 31, 2022 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

No tax benefit has been reported in the December 31, 2023 financial statements since the potential tax benefit from net operating loss carryforward is offset by a valuation allowance of the same amount.

At December 31, 2023, the Company had gross realized capital loss carryforwards of $ 5.1 million, which expire beginning in 2027 if not utilized.

A full valuation allowance has been recorded against this amount.

For the years ending December 31, 2023 and 2022, the Company reflects a deferred tax liability in the amount of $ 1.4 million and $ 2.4 million (after the correction of the error identified as described in Note 2), respectively, due to the future tax liability from assets with indefinite lives known as a “naked credit.” The future tax liability created by this indefinite lived asset can be offset by up to 80% of net operating loss carryforwards created after 2017.

The remaining portion of the future tax liability from indefinite lived assets cannot be used to offset definite lived deferred tax assets.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations.

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ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.

If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the consolidated financial statements.

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes.

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The Company files income tax returns in the U.S.

federal jurisdiction and in the states of California, Massachusetts, and New Jersey.

federal jurisdiction and in the states of California, Florida, Massachusetts, New Jersey, New York, as well as Canada.

To the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward to make adjustments up to the amount of the net operating losses.

The Company is currently subject to U.S.

federal, state and local, or non-U.S.

income tax examinations by tax authorities since inception of the Company.

Genius Brands International, Inc.

is subject to U.S.

income taxes on a stand-alone basis.

Genius Brands International, Inc., Beacon Communications Canada, Ameba Inc., and WOW Unlimited Media Inc.

file separate stand-alone tax returns in each jurisdiction in which they operate.

Beacon Communications Canada, Ameba Inc., and WOW Unlimited Media Inc.

are corporations operating in Canada and are subject to Canadian income taxes on their stand-alone taxable incomes.

federal, state and local and foreign tax examinations by tax authorities.

The Company is no longer subject to audits by U.S.

federal, state, local or foreign authorities for years prior to 2019.

Kartoon Studios, Inc.

and its wholly-owned U.S.

subsidiaries are subject to U.S.

income taxes and file a consolidated tax return in the U.S.

The Beacon Communications Group, Ltd., Ameba Inc.

and WOW Unlimited Media Inc.

are subject to Canadian income taxes on a stand-alone basis and file separate tax returns in Canada.

Commitments and Contingencies

The following is a schedule of future minimum contractual obligations as of December 31, 2022 (in thousands):

The following is a schedule of future minimum cash contractual obligations as of December 31, 2023 (in thousands):

2024 2025 2026 2027 2028 Thereafter Total

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The Company pays rent of $ 0.4 million annually, subject to annual escalations of 3.5 %.

On February 1, 2021, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general office space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to an 84-month lease which commenced on October 1, 2019.

On February 1, 2021, as part of the acquisition of Beacon Communications, the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general office space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to an 84-month lease which commenced on October 1, 2019.

The Company pays rent of $ 95,830 annually, subject to annual escalations of 5 % to 7 %.

Also, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on April 30, 2019 for 3,379 square feet of general office space located at One International Boulevard, 11 th Floor, Mahawh, New Jersey pursuant to a 24-month lease which ended on May 1, 2021.

The Company pays rent of $ 74,338 annually.

On March 2, 2021, the Company entered into an operating lease for 4,765 square feet of general office space located at 1050 Wall Street West, Suite 665, Lyndhurst, NJ 07071 pursuant to an 89-month lease which commenced on October 1, 2021.

The Company pays rent of $ 0.1 million annually subject to annual escalations of 2.5 %.

On April 6, 2022, as part of the Wow Acquisition, the Company assumed an operating lease for 45,119 square feet of general office space located at 2025 West Broadway, Suite 200, Vancouver, B.C., V6J 1Z6.

The right of use asset and lease liability were revalued on the acquisition date based on the remaining lease term of 117 months with payments of $ 81,769 per month, subject to escalations of 7 % each of the third and fifth years.

The lease liability and right of use asset were determined to be $ 6.6 million, utilizing a discount rate of 11.5 %.

As part of the assumed office lease, the Company also assumed a parking lease for 80 parking spaces.

The parking lease was also revalued utilizing the 11.5 % discount rate.

With a remaining lease term of 117 months, paying $ 6,091 per month, the ROU asset and lease liability were determined to be $ 0.5 million as of the acquisition date and recorded within current and noncurrent Operating Lease Liabilities on the Company's consolidated balance sheet upon acquisition.

Also, as part of the Wow Acquisition, the Company assumed various equipment finance leases, the majority of which are under Master Line of Credit Agreements with certain banking institutions.

As the rates were implicit in the leases, the Company determined that the carrying value of the leases as of the acquisition date equaled the fair value.

With the implicit rates in the leases range from 3.7 %- 14.5 %, remaining lease terms of 10 - 33 months and monthly payments of $ 1,346 -$ 57,362 as of the Wow Acquisition date, the finance lease obligations were determined to be $ 3.5 million and recorded as current and noncurrent Finance Lease Liabilities on the Company’s consolidated balance sheet upon consolidation.

The present value discount of the minimum operating lease payments above was $ 4.1 million as of December 31, 2022.

The Company paid rent of $ 115,154 annually, subject to annual escalations of 2.5 %.

Effective August 1, 2023, the Company terminated the lease.

On April 6, 2022, as part of the Wow acquisition, the Company assumed an operating lease for 45,119 square feet of general office space located at 2025 West Broadway, Suite 200, Vancouver, B.C., V6J 1Z6 which had a remaining lease term of 117 months and payments of $ 81,769 per month, subject to escalations of 7 % each of the third and fifth years.

In addition, the Company also assumed a parking lease for 80 parking spaces which had a remaining lease term of 117 months and payments of $ 6,091 per month.

Effective November 1, 2023, the Vancouver office lease was modified to include rent concessions and rent payment deferrals.

The landlord granted an abatement of CAD 0.2 million for the rent payments on November 1, 2023, and December 1, 2023.

Additionally, rent payments from January to April 1, 2024, totaling CAD 0.4 million, will be deferred.

The Company will repay the deferred amount through 8 equal payments of CAD 0.1 million, starting on May 1, 2024.

Also, as part of the Wow acquisition, the Company assumed various equipment finance leases, the majority of which are under equipment lease financing arrangements with certain banking institutions and had remaining lease terms of 10 - 33 months and monthly payments of $ 1,346 -$ 57,362 .

The present value discount of the minimum operating lease payments above was $ 3.3 million which when deducted from the cash commitments for the leases included in the table above, equates to the lease liabilities of $ 7.6 million recorded as of December 31, 2023 on the Company’s consolidated balance sheet.

Other Funding Commitments

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directors, musicians or other creative talent for which the Company is obligated to share with these service providers a portion of the net profits of the properties on which they have rendered services, as defined in each respective agreement.

The Company is not a party to any material legal proceedings and is not aware of any material pending or threatened claims except for those cases described in Part I Item 3 Legal Proceedings within this Annual Form 10-K.

From time to time however, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

Related Party Transactions

Pursuant to his employment agreements dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of $ 12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the year ended December 31, 2022 and December 31, 2021, Mr.

Heyward earned $ 775,000 and $ 543,750 in producer fees, respectively, and earned $ 220,000 in quarterly bonuses in each year ended.

Pursuant to his employment agreement dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an executive producer fee of $ 12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the years ended December 31, 2023 and December 31, 2022, Mr.

Heyward earned and was paid $ 0.3 million and $ 0.8 million in executive producer fees, respectively.

Heyward also earned his $ 55,000 quarterly bonus during each of the quarters in 2023 and 2022.

On August 25, 2022, Mr.

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Heyward provided services for, he has the option to purchase the additional royalties from the Company at the price the Company paid to acquire the additional royalties.

During the year ended December 31, 2022, Mr.

Heyward earned $ – in royalties from musical compositions.

Pursuant to his employment agreement dated April 7, 2022, Michael Hirsh, CEO of Wow and its Frederator and Mainframe Studio subsidiaries is entitled to an Executive Producer fee of $ 12,400 per one-half hour for each episode of any audio-visual production produced by Wow and any of its subsidiaries during the term of his employment, up to 52 episodes per year .

During the years ended December 31, 2023 and December 31, 2022, Mr.

Heyward has not earned royalties from musical compositions.

On February 27, 2023, Mr.

Heyward’s employment agreement was further amended to provide him a creative producer fee of $ 100,000 per quarter for services rendered to Wow, prorated for the first quarter.

During the year ended December 31, 2023, Mr.

Hirsh earned $ – in producer fees under the employment agreement.

Heyward earned and was paid $ 0.3 million in creative producer fees.

On July 21, 2020, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward.

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The terms and conditions of such license are customary within the industry, and the Company earns an arm-length industry standard royalty on all sales made by AHAA utilizing the licensed content.

During the year ended December 31, 2022 and December 31, 2021, Mr.

Heyward earned $ – in royalties from this agreement.

On September 30, 2021, the Company entered into a Loan Agreement and Promissory Note with POW in the amount of $ 1,250,000 , accruing simple interest at the annualized rate of 9 %.

The Stan Lee Library (the "Library") and related intellectual property not yet owned by the Company secure repayment of the loan.

Within the Loan Agreement, it is stated that the proceeds of $ 1,000,000 are required to be used by POW to settle the arbitration against Stan Lee Studios (aka Proxima Studios) and $ 250,000 shall be used to solely pay for the payment of legal costs and fees.

The principal amount was transferred to POW!

on October 12, 2021 and on or about November 4, 2021, POW and Proxima entered into a binding settlement agreement resolving all the claims made by Proxima.

The loan has accrued interest of $ 0.1 million and $ 0.03 million as of December 31, 2022 and December 31, 2021, respectively, recorded with the principal balance within Note Receivable from Related Party on the Company’s consolidated balance sheets.

In addition, pursuant to its joint venture with POW and formation of the entity Stan Lee Universe, LLC, the Company included within Note Receivable from Related Party, the amount owed to the Company related to the 50 % non-controlling interest held by POW.

On November 1, 2022, POW failed to repay the Loan as set forth in the applicable loan agreement.

GBI then provided POW with a notice of default and thirty days to cure.

As of December 31, 2022, the Company has not received payment on the Loan.

As the Library secures repayment, the Company initiated a public sale during February 2023 of the Stan Lee Library owned by POW.

The Library consists of over 250 titles, most of which were created by Stan Lee during his employment with POW from 2001 to 2018.

The Library includes treatments, synopses and screenplays, as well as derivative rights in certain novels, comic books and other publications.

The public auction is being conducted by auctioneer Ocean Tomo, a division of J.S.

The auction will be held on April 21, 2023 and Ocean Tomo will be accepting initial bids on the Library until April 7, 2023.

The Company will be participating in the auction as a credit bidder.

During the year ended December 31, 2022, the Company and YFE completed an asset exchange transaction pursuant to a License and Distribution Agreement (the “Agreement”) signed on June 27, 2022.

The Agreement includes multiple elements, including (i) broadcast rights and (ii) distribution rights.

Stefan Piëch, a member of the Company’s Board of Directors since June 23, 2022, is the Chief Executive Officer of YFE.

The Company currently has a 44.8 % economic ownership interest in YFE and Mr.

Piëch has a 26.1 % economic ownership interest in YFE.

Pursuant to the Agreement, the Company granted YFE the right to use certain of the Company’s programs to broadcast on YFE’s channels

in certain territories and in exchange, the Company shall be entitled to receive a flat fee of EUR 1.0 million upon delivery of the programs.

In addition, YFE granted the Company the right to use certain of YFE’s programs to broadcast on the Company’s channels in certain territories and in exchange, YFE shall be entitled to receive a flat fee of EUR 1.0 million upon YFE’s delivery of the programs.

The rights between the parties were exchanged and invoices were generated and marked as paid without cash actually being exchanged between the parties as it was agreed that the physical transfer of cash was unnecessary.

The EUR 1.0 million was treated as an asset exchange and was not included as part of revenue generated by the Company.

Each party granted to the other distribution rights to those same titles.

The distribution rights grant the Company the right to license the YFE titles to third parties within specific territories and YFE the right to license the Company’s titles to third parties worldwide.

Each party will earn a commission of 30 % from gross receipts of titles distributed and reimbursement of up to 5 % of expenses incurred.

During the years ended December 31, 2023 and December 31, 2022, Mr.

Heyward has not earned royalties from this agreement.

On September 30, 2021, the Company entered into a Loan Agreement and Promissory Note with POW, its joint venture partner in SLU, in the amount of $ 1,250,000 included within Note and Accounts Receivable from Related Party as of December 31, 2022, which was fully repaid by POW in April 2023.

On July 19, 2022, the Company entered into a Shareholder Loan Agreement with YFE in the amount of EURO 1.3 million, accruing interest at the fixed annualized rate of 5 %, with successive interest periods of three months due on the last day of each calendar quarter.

The entire principal sum was required to be remitted to YFE within 5 days of the effective date.

The principal plus interest must be repaid by no later than June 30, 2026.

The loan has accrued interest of USD $ 0.03 million as of December 31, 2022 recorded with the principal balance within Note Receivable from Related Party on the Company’s consolidated balance sheet.

On December 1, 2021, the Company entered into an Independent Contractor Agreement for two years with F&M Film and Medien Beteiligungs GmbH ("F&M"), a company controlled by Dr.

As of December 31, 2023, $ 1.4 million is included within Notes and Accounts Receivable from Related Party on the Company’s consolidated balance sheets.

On December 1, 2021, the Company entered into an Independent Contractor Agreement for a term of two years with F&M Film and Medien Beteiligungs GmbH (“F&M”), an Austrian company controlled by Dr.

Stefan Piëch.

Pursuant to the agreement, F&M will receive $ 150,000 annually, paid on a semi-monthly basis.

In addition, Dr.

Piëch was granted 30,000 of the Company's RSUs that vest in three six-month intervals beginning on December 1, 2021.

Pursuant to the agreement, F&M received $ 150,000 annually, paid on a semi-monthly basis.

In addition, F&M was granted 30,000 shares of common stock.

During 2022, the Company entered into a sublease agreement with a related party to lease one office in the general office space at 190 N.

Canon Drive, Suite 400, Beverly Hills, CA 90210.

During the year ended December 31, 2022, the Company recorded $ 2,985 of sublease income within Other Income (Expense), Net on the Company's consolidated statement of operations.

The monthly payment is $ 595 and recorded within Other Income (Expense), net in the Company's consolidated statements of operations.

Segment Reporting

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The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed.

All expenses directly attributable to each reportable segment are included in operating results for each segment.

All expenses directly attributable to each reportable segment are included in the operating results for each segment.

However, the CODM does not evaluate the expenses by operating segment and, therefore, it is not separately presented.

The following table presents the revenue and net earnings within the Company's two operating segments for the year ended December 31, 2022 (in thousands):

December 31, 2022 December 31, 2021

The following table presents the revenue and net earnings within the Company's two operating segments (in thousands):

Year Ended December 31,

Total Revenues:

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Media Advisory & Advertising Services 4,939 5,088

Total Revenue $ 62,299 $ 7,873

Total Revenues $ 44,085 $ 62,299

Content Production & Distribution $ ( 76,004 ) $ ( 36,862 )

Media Advisory & Advertising Services ( 1,099 ) ( 8,733 )

Total Operating Loss $ ( 45,595 ) $ ( 126,291 )

Total Net Loss $ ( 77,103 ) $ ( 45,595 )

Geographic Information

The following table provides information about disaggregated revenue by geographic area at year ended December 31, 2022 (in thousands):

December 31, 2022 December 31, 2021

The following table provides information about disaggregated revenue by geographic area (in thousands):

Year Ended December 31,

Total Revenues:

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United Kingdom 8,650 3,057

Total Revenue $ 62,299 $ 7,873

Other 645 356

Total Revenues $ 44,085 $ 62,299

Subsequent Events

On February 6, 2023, the Company's board of directors approved a 1-for-10 reverse stock split of the Company's outstanding shares of common stock.

The reverse stock split was effected on February 10, 2023 at 5:00 p.m.

Eastern time.

At the effective time, every 10 issued and outstanding shares of the Company's common stock were converted into 1 share of common stock.

Any fractional shares of common stock resulting from the reverse stock split were rounded up to the nearest whole post-split share and no shareholders received cash in lieu of fractional shares.

The par value of each share of common stock remained unchanged.

The reverse stock split proportionately reduced the number of shares of authorized common stock from 400,000,000 to 40,000,000 shares.

The reverse stock split also applied to common stock issuable upon the exercise of the Company's outstanding warrants and stock options.

The reverse stock split did not affect the authorized preferred stock of 10,000,001 shares.

Unless noted, all references to shares of common stock and per share amounts contained in this Annual Report on Form 10-K have been retroactively adjusted to reflect a 1-for-10 reverse stock split.

On February 16, 2023, the Company received a notification of exercise from a holder of certain warrants with a put option that became exercisable on October 25, 2022.

The put option was exercised for a fixed rate of $ 250,000 for the 50,000 warrants held.

On February 20, 2023, the Company initiated a public sale of the Stan Lee Library owned by POW.

The Library consists of over 250 titles, most of which were created by Stan Lee during his employment with POW from 2001 to 2018.

The Library includes treatments, synopses and screenplays, as well as derivative rights in certain novels, comic books and other publications.

The public auction is being conducted by auctioneer Ocean Tomo, a division of J.S.

The auction will be held on April 21, 2023 and Ocean Tomo will be accepting initial bids on the Library until April 7, 2023.

The Company will be participating in the auction as a credit bidder.

On February 27, 2023, Mr.

Heyward’s employment agreement was further amended with regard to his eligibility to receive Executive Producer Fees.

Pursuant to a prior amendment to his employment agreement executed in 2021, Mr.

Heyward was granted the right to be paid an Executive Producer Fee for up to 104 half hour episodes.

The February 2023 amendment reduced the number of episodes eligible for Executive Producer fees to 52 per year and instead provided that Mr.

Heyward shall receive a bonus of $ 100,000 per quarter for services rendered to the Company’s subsidiary Wow Unlimited Media.

On February 28, 2023, the Company received written notification from Nasdaq notifying it that since the closing bid price of its Common Stock for the previous 10 consecutive business days, from February 13, 2023, through February 28, 2023, had been at $1.00 per share or greater, the Company has regained compliance with the Minimum Bid Price Requirement during the Second Compliance Period and that this matter is now closed.